Days of Inventory Calculator

Days of Inventory Formula:

\[ DOI = \left( \frac{\text{Average Inventory}}{\text{COGS}} \right) \times 365 \]

Days of Inventory (DOI):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Days of Inventory?

Days of Inventory (DOI) is a financial metric that measures the average number of days a company holds its inventory before selling it. It indicates how efficiently a company manages its inventory and converts it into sales.

2. How Does the Calculator Work?

The calculator uses the Days of Inventory formula:

\[ DOI = \left( \frac{\text{Average Inventory}}{\text{Cost of Goods Sold}} \right) \times 365 \]

Where:

\( Average Inventory \) — The average value of inventory held during the period (dollars)
\( COGS \) — Cost of Goods Sold for the year (dollars/year)
\( 365 \) — Number of days in a year

Explanation: The formula calculates how many days it would take to sell the average inventory based on the current cost of goods sold rate.

3. Importance of DOI Calculation

Details: Days of Inventory is crucial for assessing inventory management efficiency, identifying potential cash flow issues, and optimizing working capital. A lower DOI generally indicates better inventory management.

4. Using the Calculator

Tips: Enter average inventory in dollars and annual cost of goods sold in dollars per year. Both values must be positive numbers. The calculator will compute the days of inventory.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Days of Inventory value?
A: This varies by industry, but generally, a lower DOI is better. Compare with industry averages and historical company performance for meaningful analysis.

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

Q3: What's the difference between DOI and Inventory Turnover?
A: Inventory Turnover = COGS ÷ Average Inventory, while DOI = 365 ÷ Inventory Turnover. They measure the same efficiency from different perspectives.

Q4: Why use 365 days in the formula?
A: 365 represents the number of days in a year, converting the inventory turnover ratio into a days-based metric for easier interpretation.

Q5: Can DOI be too low?
A: Yes, extremely low DOI might indicate stockouts or insufficient inventory to meet demand, which could lead to lost sales opportunities.