1. What is Days Sales In Inventory?

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

2. How Does the Calculator Work?

The calculator uses the DSI formula:

Where:

• \( \text{Average Inventory} \) — The average value of inventory during a period (currency)
• \( \text{COGS per Day} \) — Cost of Goods Sold per day (currency/day)

Explanation: DSI shows how many days it would take to sell the entire inventory at the current sales rate. Lower DSI generally indicates better inventory management.

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. It helps businesses optimize inventory levels and reduce holding costs.

4. Using the Calculator

Tips: Enter average inventory in currency units and COGS per day in currency/day. Both values must be positive numbers. The calculator will compute the number of days it takes to sell the inventory.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DSI value?
A: Ideal DSI varies by industry. Generally, lower values are better, but compare with industry averages. Retail typically has lower DSI than manufacturing.

Q2: How is average inventory calculated?
A: Average Inventory = (Beginning Inventory + Ending Inventory) ÷ 2 for a specific period.

Q3: How to calculate COGS per day?
A: COGS per Day = Total Cost of Goods Sold for a period ÷ Number of days in that period.

Q4: What does high DSI indicate?
A: High DSI may indicate slow-moving inventory, overstocking, or declining demand, which can tie up capital and increase storage costs.

Q5: How often should DSI be calculated?
A: DSI should be calculated regularly (monthly or quarterly) to monitor inventory trends and make timely business decisions.