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.