1. What is Days of Inventory?

Days of Inventory (DOI) is a financial metric that measures the average number of days a company holds its inventory before selling it. It indicates how efficiently a company manages its inventory levels and supply chain operations.

2. How Does the Calculator Work?

The calculator uses the Days of Inventory formula:

Where:

• \( Average Inventory \) — The average value of inventory held during the period (currency)
• \( COGS \) — Cost of Goods Sold for the year (currency/year)
• \( 365 \) — Number of days in a year

Explanation: The formula calculates how many days it would take to sell the average inventory based on the current cost of goods sold rate.

3. Importance of DOI Calculation

Details: DOI is crucial for inventory management, cash flow analysis, and operational efficiency. A lower DOI indicates faster inventory turnover and better working capital management.

4. Using the Calculator

Tips: Enter average inventory and COGS in the same currency units. Both values must be positive numbers. The result shows the number of days inventory is typically held before sale.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Days of Inventory value?
A: It varies by industry, but generally lower values are better. Compare with industry benchmarks and historical trends for meaningful analysis.

Q2: How is Average Inventory calculated?
A: Typically calculated as (Beginning Inventory + Ending Inventory) ÷ 2 for the period being analyzed.

Q3: Why use 365 days in the formula?
A: 365 represents the number of days in a year, converting the inventory turnover ratio into days for easier interpretation.

Q4: What does a high DOI indicate?
A: High DOI may indicate slow-moving inventory, overstocking, or potential obsolescence issues that could tie up working capital.

Q5: How does DOI differ from Inventory Turnover?
A: Inventory Turnover = COGS ÷ Average Inventory, while DOI = 365 ÷ Inventory Turnover. They measure the same efficiency from different perspectives.