1. What is Days Sales in Inventory?

Days Sales in Inventory (DSI) is a financial ratio that measures the average time in days that a company takes to turn its inventory into sales. It indicates inventory management efficiency and liquidity of inventory.

2. How Does the Calculator Work?

The calculator uses the DSI formula:

Where:

• Average Inventory — The average value of inventory over the period
• Cost of Goods Sold — Total cost of goods sold during the period
• Number of Days — Time period (typically 365 for annual calculation)

Explanation: The ratio shows how many days' worth of inventory the company has on hand based on its current sales rate.

3. Importance of DSI Calculation

Details: DSI is crucial for assessing inventory management efficiency. A lower DSI typically indicates better performance, though optimal values vary by industry.

4. Using the Calculator

Tips: Enter average inventory and cost of goods sold in the same currency. The number of days is typically 365 for annual calculations or 90 for quarterly.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DSI value?
A: It varies by industry. Generally, lower is better, but compare with industry averages for meaningful analysis.

Q2: How does DSI differ from inventory turnover?
A: Inventory turnover shows how many times inventory is sold and replaced, while DSI converts this to days for easier interpretation.

Q3: Should I use beginning, ending, or average inventory?
A: Average inventory (beginning + ending / 2) gives the most accurate picture for the period.

Q4: Why use COGS instead of sales?
A: COGS better represents the actual cost of inventory sold, as sales include markup which would distort the ratio.

Q5: What causes high DSI?
A: High DSI may indicate overstocking, slow-moving inventory, or declining sales relative to inventory levels.