Days Sales in Inventory Calculator
Work out days sales in inventory (DSI) from average inventory and cost of goods sold, with inventory turnover for the same period. Enter the inventory at the end of the period (and at the start, for the average), the cost of goods sold and the days; the second tab shows the stock you would carry at a target DSI and what reaching it frees.
Inventory and cost of goods sold
Enter it to use the average of start and end instead of the end value.
At cost, from the income statement, for the same period as the days below.
Results
Days sales in inventory
60 days
$240,000 ÷ $1,460,000 × 365 days
Inventory turnover
6.08 times
365 days ÷ 6.08 = 60 days
Cost of goods sold per day
$4,000
Inventory for a target DSI
Enter the cost of goods sold and the period above, then the number of days of stock you want to carry. Add your current inventory to see the stock a lower DSI frees, or the extra a higher one needs.
At cost, from the income statement, for the same period as the days below.
For example 45 for about six weeks of stock.
Leave empty to use the inventory from the first tab.
Results
Inventory at the target
$180,000
$4,000 a day × 45 days
Turnover at the target
8.11 times
Stock freed
$60,000
Against $240,000 today (60 days)
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What days sales in inventory is, and the DSI formula
Days sales in inventory (DSI) is the average number of days stock sits before it is sold. The same figure goes by several names: days inventory outstanding (DIO), days in inventory, and days of inventory on hand. If a supplier, a lender or a finance team asks for any of them, this is the number.
DSI = average inventory ÷ cost of goods sold × days in the period. Both sides are at cost: inventory is valued at what you paid for it, so it is divided by the cost of what you sold, not by revenue.
Example: $240,000 of inventory and $1,460,000 of cost of goods sold over a year. DSI = $240,000 ÷ $1,460,000 × 365 = 60 days: on average, an item waits about two months on the shelf. Put the other way, you sell $4,000 of stock at cost a day and hold 60 days of it.
Inventory turnover and DSI
Inventory turnover = cost of goods sold ÷ average inventory: how many times the stock is sold and replaced in the period. In the example, $1,460,000 ÷ $240,000 = 6.08 times a year. DSI is the same information in days: 365 ÷ 6.08 = 60 days.
Turnover is easier to compare across years, days are easier to act on. The calculator shows both, and the check that one divides into the other.
Average or ending inventory, and which days to use
The usual average is (beginning inventory + ending inventory) ÷ 2. It smooths out a delivery that lands on the last day of the period. Example for a quarter: $55,000 at the start and $65,000 at the end is an average of $60,000; with $270,000 of cost of goods sold in 90 days, turnover is 4.5 and DSI is 20 days. Leave the start empty and the calculator uses the ending inventory alone.
Use the days that match the cost of goods sold: 365 for a year, about 90 for a quarter, 30 or the month's days for a month. If you report on a 360-day year, choose it: the figure is then 360/365 of the 365-day one. Whichever you pick, keep it the same from period to period.
A target DSI, and the cash it frees
Every day of DSI is one day of cost of goods sold sitting in the warehouse. Inventory at a target = cost of goods sold per day × target days. In the example, $4,000 a day × 45 days = $180,000; against $240,000 on hand, reaching 45 days frees $60,000 of cash that is currently stock.
A higher target works the same way in reverse: the second tab shows the extra stock it needs, which is the cost of better availability or longer supplier lead times.
DSI and the cash conversion cycle
DSI is the first part of the cash conversion cycle: cash conversion cycle = DSI + DSO − DPO. DSO (days sales outstanding) is how long customers take to pay; DPO (days payables outstanding) is how long you take to pay suppliers. With a DSI of 60, a DSO of 45 and a DPO of 30, cash is tied up for 60 + 45 − 30 = 75 days between paying for stock and collecting for it.
Distributors and manufacturers feel both halves: stock waiting to be sold and invoices waiting to be paid. Work out DSO with the Days Sales Outstanding Calculator, linked below, and add the two.
The results are built from what you enter. Use cost of goods sold, not revenue, for the same period as the inventory, keep the day count the same from one period to the next, and compare DSI with your own trend and your own lead times rather than a general benchmark.
For distributor and manufacturing sales: distributor sales, industrial distributors, wholesale sales reps, the manufacturing sales process.
Stock piles up when what the customer said is not written down
Forecasts, order quantities and delivery dates are agreed in customer meetings, then purchasing guesses. Record the meeting in ParrotNotes and get the summary and action items, so the quantities and dates you agreed are in writing before anyone orders stock. Free for 100 minutes of recording a month.
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