Days Inventory Outstanding (DIO) Calculator
Calculate how many days inventory sits before being sold, and convert it into inventory turnover to assess stock efficiency.
📦 Working Capital📐 DIO = (average inventory / COGS) × 365💼 Business
Average inventory value
Annual cost of goods sold
Days in period
Inventory carrying cost rate (%, optional)
Please enter valid values.
Formula & Reference
| Variable | Symbol | Formula | Units |
|---|---|---|---|
| Days Inventory Outstanding (DIO) Calculator | — | DIO = (average inventory / COGS) × 365 | days |
Step-by-Step Examples
Example 1
Moderate Turnover
Average inventory 250,000, annual COGS 2,000,000.
- DIO = (250,000 / 2,000,000) × 365
- DIO = 45.6 days
- Turnover = 365 / 45.6 = 8.0 times per year
✓ 45.6 days, 8.0 turns
Example 2
Fast Moving
Average inventory 80,000, annual COGS 3,200,000.
- DIO = (80,000 / 3,200,000) × 365
- DIO = 9.1 days
- Turnover = 40 times per year — typical of grocery or fresh goods
✓ 9.1 days, 40 turns
Example 3
Slow Moving
Average inventory 900,000, annual COGS 1,500,000, 22% carrying cost.
- DIO = (900,000 / 1,500,000) × 365 = 219 days
- Turnover = 1.67 times per year
- Carrying cost = 900,000 × 22% = 198,000 annually
✓ 219 days — 198,000 annual carrying cost
Real-World Applications
Capital Efficiency
Every day of inventory represents cash locked in stock rather than deployed elsewhere in the business.
Obsolescence Risk
Slow-moving inventory carries growing risk of markdown, spoilage, or write-off, particularly in fashion and technology.
Purchasing Decisions
DIO informs reorder timing and quantity, balancing stockout risk against carrying cost.
Cycle Component
DIO is one of the three inputs to the cash conversion cycle, alongside receivable and payable days.
Common Mistakes to Avoid
⚠️
Using ending inventory instead of average
Ending inventory can be seasonally distorted. Averaging opening and closing balances gives a more representative figure.
⚠️
Using revenue instead of COGS
Revenue includes gross margin, which inflates turnover and understates DIO. Inventory is carried at cost, so COGS is the correct denominator.
⚠️
Chasing minimum inventory blindly
Cutting stock too far raises stockout risk, lost sales, and expedited shipping costs. The goal is optimum, not minimum.
Frequently Asked Questions
What is days inventory outstanding? ▾
The average number of days inventory is held before being sold, calculated as average inventory divided by cost of goods sold, multiplied by days in the period.
What is a good DIO? ▾
Highly sector-dependent. Grocery may run under 15 days, general retail 30 to 60, and heavy manufacturing or jewellery considerably longer.
How does DIO relate to inventory turnover? ▾
They are inverses. Turnover equals days in period divided by DIO, so 45 days corresponds to roughly 8 turns per year.
Why use COGS rather than revenue? ▾
Because inventory is recorded at cost. Using revenue mixes cost and margin, systematically overstating turnover.
What does inventory carrying cost include? ▾
Storage, insurance, handling, shrinkage, obsolescence, and the opportunity cost of capital — commonly totalling 20 to 30% of inventory value annually.