The average number of days inventory sits before being sold. Lower means faster turnover and less capital tied up. Below 60 days is generally efficient. Rising DIO can signal demand problems.
Formula
Description
Measures the average number of days inventory sits before being sold. Lower DIO means faster inventory turnover and less capital tied up in stock. Rising DIO can signal demand problems or overproduction.
Interpretation
Below 60 days is generally efficient. Above 120 days may indicate slow-moving inventory or demand weakness. Compare to peers in the same industry, as inventory norms vary widely. Service companies often have near-zero DIO.
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