Days in Inventory

The Days in Inventory equation is used to determine how quickly a company is converting their inventory into sales. It is often used as a measure of short-term sales potential. A slower turnaround on sales may be a warning sign that there are problems internally, such as brand image or the product, or externally, such as an industry downturn or the overall economy.  Also known as days cover, stock cover, or days sales to inventory (DSI).

EXAMPLE

Suppose that a company is calculating the days in inventory held based on a inventory turnover of 4.32 for one year. This can be divided into 365 days of the year for an average days in inventory of 84.49. If the same company has an inventory turnover of 2.31 for 180 days, the average days in inventory would be 77.92.