1. What is the Day Of Inventory Formula?

The Day Of Inventory (DOI) formula calculates the average number of days that inventory is held before being sold. It's a key financial metric used to measure inventory management efficiency and working capital optimization.

2. How Does the Calculator Work?

The calculator uses the DOI formula:

Where:

• \( Inventory \) — Value of inventory in dollars
• \( COGS \) — Cost of Goods Sold in dollars per year
• \( 365 \) — Number of days in a year

Explanation: The formula divides inventory value by daily COGS to determine how many days the current inventory would last based on current sales rates.

3. Importance of DOI Calculation

Details: DOI is crucial for assessing inventory management efficiency, identifying potential cash flow issues, optimizing working capital, and comparing performance against industry benchmarks.

4. Using the Calculator

Tips: Enter inventory value in dollars and COGS in dollars per year. Both values must be positive numbers. The calculator will compute the days of inventory.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DOI value?
A: Ideal DOI varies by industry. Generally, lower values indicate better inventory management, but too low may risk stockouts. Compare with industry averages.

Q2: How does DOI differ from inventory turnover?
A: DOI shows days inventory is held, while inventory turnover shows how many times inventory is sold/replaced annually. They are inversely related.

Q3: What factors affect DOI?
A: Seasonality, sales trends, supplier lead times, inventory management practices, and product shelf life all impact DOI.

Q4: When should I be concerned about high DOI?
A: High DOI may indicate slow-moving inventory, obsolescence risk, or poor sales, tying up working capital unnecessarily.

Q5: Can DOI be too low?
A: Yes, very low DOI may indicate risk of stockouts, lost sales opportunities, or inefficient ordering processes with high ordering costs.