Finance Calculator
Inventory Days Calculator
Calculate how many days your business holds stock before it is sold. Enter your average inventory value and annual cost of goods sold to see your inventory days (DIO) and an instant stock efficiency assessment.
Enter your inventory and cost of goods sold
How are inventory days calculated?
Inventory days — also known as days inventory outstanding (DIO) or stock days — measures the average number of days a business holds inventory before it is sold. It is a key component of the cash conversion cycle and indicates how efficiently a business manages its stock levels.
Inventory Days = (Average Inventory / COGS) — 365
Daily COGS = Annual COGS / 365
Average inventory is typically calculated as the average of the opening and closing inventory balances for the period. If only one figure is available, the closing inventory balance from the balance sheet is commonly used.
Cost of goods sold (COGS) represents the direct costs attributable to the production or purchase of goods sold during the period. This is found on the profit and loss statement.
A lower inventory days figure means stock is turning over quickly, reducing the amount of cash tied up in unsold goods. However, very low inventory days may indicate a risk of stock-outs if demand increases unexpectedly.
Assumptions and caveats
- •Using a point-in-time inventory balance may not reflect average stock levels if your business has seasonal patterns.
- •The calculation assumes all inventory is saleable. Obsolete, damaged, or slow-moving stock will inflate the figure.
- •Different industries have vastly different inventory day norms. Perishable goods businesses operate at much lower levels than heavy manufacturing.
- •Service businesses with no physical inventory can set this figure to zero when calculating their cash conversion cycle.
Frequently asked questions
Inventory days — also known as days inventory outstanding (DIO) or stock days — measures the average number of days a business holds inventory before it is sold. It indicates how efficiently a business manages its stock levels and how quickly it converts inventory into revenue.
Under 15 days is considered lean and typical of just-in-time operations. 15 to 30 days is efficient for most product businesses. 30 to 60 days is standard in many industries. 60 to 90 days suggests slow-moving stock, and above 90 days may indicate excess inventory that ties up significant working capital.
Higher inventory days mean more cash is locked up in unsold stock, reducing available working capital. This increases the cash conversion cycle and may require additional funding to cover the gap. Reducing inventory days frees up cash and shortens the time between buying stock and receiving payment from customers.
No. Pure service businesses, consultancies, and digital businesses typically hold no physical inventory. For these businesses, inventory days are zero and the cash conversion cycle depends only on receivable and payable days. Businesses with any physical products, raw materials, or work-in-progress will have inventory to account for.
Need to free up cash tied in stock?
Speak to the Spark team about working capital and asset finance solutions that can help optimise your inventory funding.
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