Inventory days, also known as Days Inventory Outstanding (DIO), measures how long your business holds stock before it is sold or used, on average. It’s an important metric because it provides a general gauge of your stock management efficiency. An increasing inventory days figure may indicate slow-moving stock, excess inventory, or potential cash flow problems.
Formula: Inventory Days = (Average Stock ÷ Cost of Goods Sold) × Number of Days in Period
How to use the calculator
Enter the following information to calculate your inventory days:
- Average Stock: Use inventory from the balance sheet. Use stock or inventory from the balance sheet. Stock may include raw materials, work-in-progress, and finished goods. Add beginning stock and ending stock for the period, then divide by two.
- Cost of Goods Sold: Use cost of goods sold from the income statement for the same period.
- Number of Days in the Period: Typically a month, quarter, or year.
| Average Stock | A$ |
| Cost of Goods Sold | A$ |
| Number of Days in Period | |
| Inventory Days | 76.0 days |
A lower inventory days figure generally indicates that stock is moving more quickly. A high or increasing inventory days figure may indicate slow-moving stock, excess inventory, or cash tied up in stock for too long. Keep in mind that inventory days vary by industry.
Inventory days are part of the cash conversion cycle. Consequently, higher inventory days can lengthen the time it takes to convert stock into cash.
Note: This calculator is for educational purposes only and not intended as financial advice. Please consult a professional if you require financial advice.
Can we help you?
We are a leading invoice financing company and can provide high advances at competitive rates. For more information, fill out our enquiry form and a representative will contact you soon.
Marco Terry is the Managing Director of Commercial Capital LLC and has over two decades of experience in asset-based finance. He has worked with small and mid-sized companies across the United States, Canada, and Australia. Marco holds a Master of Science in Finance.