DIO: Difference between revisions
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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. | 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. | For example: a company holds on average £30,000 of stock over a year. It sells £300,000 of goods per annum. | ||
30,000/300,000*365 = 36.5 | The DIO is: | ||
30,000 / 300,000 * 365 = 36.5 days | |||
A lower number of days is usually considered desirable, because it is a quick measure of the amount of stock held, although the business must also gauge the amount of stock required to meet customers’ delivery expectations. | |||
Also known as inventory days. | Also known as inventory days. | ||
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* [[Cost of goods sold]] | * [[Cost of goods sold]] | ||
* [[Creditors]] | * [[Creditors]] | ||
* [[Days sales outstanding ]] (DSO) | |||
* [[DPO]] | * [[DPO]] | ||
* [[Inventory]] | * [[Inventory]] | ||
* [[Operating cycle]] | * [[Operating cycle]] | ||
Latest revision as of 20:19, 25 June 2022
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 days
A lower number of days is usually considered desirable, because it is a quick measure of the amount of stock held, although the business must also gauge the amount of stock required to meet customers’ delivery expectations.
Also known as inventory days.
