DIO (Days Inventory Outstanding)
The average number of days a company holds inventory before selling it — a measure of inventory efficiency and supply chain management.
Also known as: Days Inventory Outstanding, Inventory days, Stock days
One-line definition
DIO tells you how long goods sit on the shelf before being sold — high DIO ties up cash in inventory.
Formula
DIO = (Inventory ÷ Cost of goods sold) × 365
TS angle
Rising DIO may indicate slow-moving or obsolete stock. TS teams assess inventory write-down risk and whether inventory provisions are adequate — excess inventory improperly valued inflates NWC and therefore equity value.
Related terms
Net Working Capital
The normalised level of working capital a target business needs to operate — a direct lever on the purchase price.
DSO (Days Sales Outstanding)
The average number of days it takes a company to collect payment after a sale has been made — a key working capital metric.
DPO (Days Payable Outstanding)
The average number of days a company takes to pay its suppliers — a measure of how effectively payables are managed as a source of working capital funding.
Cash Conversion Cycle
The time (in days) it takes a company to convert its investments in inventory and other resources into cash from sales.