1. What is Days of Sales in Inventory?

Days of Sales in Inventory (DSI) is a financial ratio that measures the average number of days a company holds its inventory before selling it. It indicates how quickly inventory is turned over and provides insight into inventory management efficiency.

2. How Does the Calculator Work?

The calculator uses the DSI formula:

Where:

• \( \text{Average Inventory} \) — The average value of inventory held during the period (currency)
• \( \text{COGS} \) — 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 entire inventory based on the current sales 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 average inventory value in currency units and annual cost of goods sold in currency/year. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DSI value?
A: Ideal DSI varies by industry. Generally, lower values are better, but it depends on the business model and industry standards.

Q2: How is average inventory calculated?
A: Average inventory is typically calculated as (Beginning Inventory + Ending Inventory) ÷ 2 for the period.

Q3: What does a high DSI indicate?
A: High DSI may indicate slow-moving inventory, overstocking, or potential obsolescence issues.

Q4: How does DSI differ from inventory turnover?
A: Inventory turnover shows how many times inventory is sold and replaced, while DSI shows the average days inventory is held.

Q5: Can DSI be negative?
A: No, DSI cannot be negative as both inventory and COGS should be positive values.