DIO

Days Inventory Outstanding.

A working capital management ratio calculated by dividing inventory outstanding at the end of a time period by the average daily cost of goods sold for the period.

For example: a company holds on average £30,000 of stock over a year. It sells £300,000 of goods per annum. The DIO is:

30,000/300,000*365 = 36.5

A lower the number of days is usually considered desirable because it is a quick measure of the amount of stock held although the business must gauge the amount of stock required to meet customers’ delivery expectations.

Also known as inventory days.

See also

• Cost of goods sold
• Creditors
• DPO
• DSO
• Inventory
• Operating cycle
• Payables management