Here we will test the webtool. You can request the Net Working Capital of a Belgian company:
Days of Inventory Outstanding
Days of Inventory Outstanding (DIO) has many synonyms, but they all point to the same concept: how quickly can a business convert its inventory into sales? This metric reflects how long a company’s inventory typically lasts, from the moment it enters storage until it is sold and leaves the premises. While the ideal DIO varies across industries, a lower number is generally preferred, as high DIOs may signal inventory mismanagement or sales challenges.
The formula for DIO is:
$$DIO = \frac{\text{Average Inventory}}{\text{Cost of Goods Sold}} \times 365 \text{ days} = \frac{1}{\text{inventory turnover}} \times 365 \text{ days}$$
With:
- Average Inventory: The total value of all materials—raw, processed, or finished—that are essential for maintaining the company’s core activities and directly related to its turnover (and profit).
- Cost of Goods Sold: The direct costs of producing the goods, representing the working capital investment required to maintain core business operations.
Essentially, DIO is a ratio that compares the value of average inventory to the total cost of generating those goods. The result shows the portion of COGS represented by your inventory. By multiplying this figure by 365 days, we express the result in a more intuitive format—how many days your inventory typically remains unsold.
While the formula suggests that a smaller average inventory is more beneficial, the reality is more complex. Larger inventories can help stabilize price fluctuations and reduce order costs, but they also increase carrying costs.
Depending on the characteristics of your inventory depletion, several models—like the Economic Order Quantity (EOQ), the Part-Period Algorithm, Periodic Order Quantity, or Least Unit Cost approach—can optimize your inventory management and help you achieve the best DIO for your business.
Example of EOQ:
Economic Order Quantity calculator
Results
| Optimal Quantity | Total Carrying Cost | Total Restocking Cost | Calculation 4 |
|---|---|---|---|
| 0 | 0 | 0 | 0 |
DSO
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DPO
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