DIO is average inventory divided by cost of goods sold, multiplied by the number of days in the period.
Built by Rankite, the SEO team behind Swordfish AI's +400% revenue and Zluri's +45% organic growth. See the case studies
A Days Inventory Outstanding calculator tells you, on average, how many days a unit of stock sits in your warehouse before it sells. It is one of the three building blocks of the cash conversion cycle, alongside days sales outstanding and days payable outstanding, and on its own it is one of the fastest ways to spot inventory that is moving too slowly.
Days Inventory Outstanding equals average inventory divided by cost of goods sold, multiplied by the number of days in the period you are measuring, usually 365 for a full year. A lower DIO means stock is converting to sales faster, while a higher DIO means cash is sitting on the shelf longer than it needs to.
Inventory turnover tells you how many times you sell through your stock in a period, and DIO tells you how many days that takes, so the two numbers are always mirror images of each other. If turnover is 6 times a year, DIO is roughly 365 divided by 6, or about 61 days, and either metric can be more intuitive depending on whether you think in cycles or in days.
There is no single healthy DIO that applies across every business, since a grocer turning over perishable stock in days looks nothing like a furniture retailer holding inventory for months. What matters more is the trend for your own business and how your DIO compares to close competitors in the same category, alongside the rest of your cash conversion cycle, since a falling DIO frees up cash that a growing ecommerce brand can put back into demand generation.
Get a free, no-obligation SEO audit and a 30-minute strategy session. We'll show you exactly where the growth is hiding.
Fill out the form and we'll get back to you within one business day. Prefer email? Write to us directly at contact@rankite.com.