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What does High Days Inventory Outstanding mean?

High days inventory outstanding also means two things – High Days Inventory Outstanding means that the company has not been able to translate its inventory into sales quickly. It also may mean that the company has been keeping obsolete inventory.

What is the difference between Days Inventory Outstanding and inventory turnover ratio?

Days inventory outstanding and inventory turnover ratio are two metrics used to measure inventory efficiency but in different ways. While DIO reflects the average number of days it takes to turn over your inventory, the inventory turnover ratio tells you how many times inventory is sold and replaced in a given period (e.g. a quarter).

How long does it take a company to clear out inventory?

Next, the company’s days inventory outstanding (DIO) can be calculated by dividing the $20mm in inventory by the $100mm in COGS and multiplying that by 365 days – which results in 73 days. Therefore, the company requires roughly ~73 days to clear out its inventory, on average.

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