Days Inventory Outstanding (DIO), also called Days Inventory Held or Inventory Days, is a financial metric that measures the average number of days a company holds its inventory before it is sold. A lower DIO means inventory is being sold faster, which reduces storage costs and obsolescence risk.<\/p>\n
DIO = (Average Inventory \/ Cost of Goods Sold) x 365<\/p>\n
Or: DIO converts the inventory turnover ratio into days, making it easier to interpret as a operational timeline.<\/p>\n – **Low DIO**: inventory is moving fast; less cash tied up in stock; lower storage costs | Industry | Typical DIO | High-value, slow-moving goods (jewellery, luxury goods) naturally have higher DIO.<\/p>\n DIO is the first component of the cash conversion cycle<\/a>: Reducing DIO shortens the cash cycle and frees up working capital.<\/p>\n An auto parts manufacturer has average inventory of Rs 100 crore and annual COGS of Rs 600 crore. DIO = (100 \/ 600) x 365 = 61 days. The company holds inventory for about 2 months before it is sold. If it can improve its just-in-time procurement to reduce inventory to Rs 70 crore, DIO drops to 43 days, freeing Rs 30 crore of cash.<\/p>\n – DIO = (Average Inventory \/ COGS) x 365; measures average days inventory is held before being sold Days Inventory Outstanding (DIO), also called Days Inventory Held or Inventory Days, is a financial metric that measures the average number of days a company holds its inventory before it is sold. A lower DIO means inventory is being sold faster, which reduces storage costs and obsolescence risk. What Is DIO? DIO = (Average Inventory […]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-14401","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"Days Inventory Outstanding (DIO), also called Days Inventory Held or Inventory Days, is a financial metric that measures the average number of days a company holds its inventory before it is sold. A lower DIO means inventory is being sold faster, which reduces storage costs and obsolescence risk. What Is DIO? DIO = (Average Inventory…","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14401","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14401\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=14401"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nDIO = 365 \/ Inventory Turnover Ratio<\/a><\/p>\nInterpreting DIO<\/h2>\n
\n– **High DIO**: inventory sits longer; more working capital tied up; higher risk of write-offs
\n– **Rising DIO**: may indicate demand slowdown, product issues, or procurement inefficiency<\/p>\nIndustry Benchmark<\/a>s<\/h2>\n
\n|———|————|
\n| Fresh produce\/food | 5-10 days |
\n| FMCG (packaged goods) | 15-30 days |
\n| Pharmaceuticals | 45-90 days |
\n| Automobiles | 30-60 days |
\n| Jewellery | 90-180 days |<\/p>\nDIO in the Working Capital Cycle<\/a><\/h2>\n
\nWorking Capital Cycle = DIO + DSO – DPO<\/p>\nPractical Example<\/h2>\n
Key Takeaways<\/h2>\n
\n– Lower DIO is generally better as it indicates efficient inventory management and faster sales
\n– Rising DIO may signal weaker demand or excess stock accumulation
\n– Industry norms vary widely; compare DIO against sector<\/a> peers, not across industries
\n– Reducing DIO is a key lever for improving working capital efficiency and reducing short-term financing needs<\/p>\n","protected":false},"excerpt":{"rendered":"