1. What is Days Sales of Inventory (DSI)?

Days Sales of Inventory (DSI) is a financial ratio that measures the average number of days a company takes to turn its inventory into sales. It indicates how efficiently a company manages its inventory levels and supply chain operations.

2. How Does the Calculator Work?

The calculator uses the DSI 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 calculates how many days it would take to sell the entire inventory based on the current cost of goods sold rate.

3. Importance of DSI Calculation

Details: DSI is crucial for assessing inventory management efficiency, identifying potential cash flow issues, and comparing performance against industry benchmarks. A lower DSI generally indicates better inventory management.

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 DSI in days.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DSI value?
A: Ideal DSI varies by industry, but generally lower values are better. Compare with industry averages for meaningful analysis.

Q2: How does DSI differ from inventory turnover?
A: DSI shows days to sell inventory, while inventory turnover shows how many times inventory is sold and replaced annually. They are inversely related.

Q3: Why use 365 days in the formula?
A: 365 represents the standard number of days in a year, providing a consistent basis for comparison across companies and periods.

Q4: What causes high DSI?
A: High DSI can indicate slow-moving inventory, overstocking, poor demand forecasting, or declining sales.

Q5: How can companies improve their DSI?
A: Strategies include better inventory management, improved demand forecasting, supplier coordination, and promotional activities for slow-moving items.