DIO: Difference between revisions
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Days Inventory Outstanding. | 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. | 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. | Also known as inventory days. | ||
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* [[Operating cycle]] | * [[Operating cycle]] | ||
* [[Payables management]] | * [[Payables management]] | ||
[[Category:Technical_skills]] | |||
[[Category:Context_of_treasury]] | |||
[[Category:Corporate_financial_management]] | |||
Revision as of 09:03, 21 November 2018
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.
