GLOSSARY // Fundamentals
Days Inventory Outstanding (DIO)
Days inventory outstanding answers one question: how long does product sit before it sells? DIO = (inventory / cost of goods sold) x 365, the average shelf time in days.
The right number is wildly industry-specific. A grocer turning fresh food runs DIO under 30; a homebuilder or a whiskey distiller carries inventory for years by design. The signal is the trend against the company's own history — inventory days climbing while sales slow often precedes markdowns, because product that will not sell at full price eventually sells at a discount or gets written off.
A retailer carries $100M in inventory against $500M in annual COGS. DIO = (100 / 500) x 365 = 73 days — about two and a half months from receiving goods to selling them. If inventory builds to $140M on unchanged COGS, DIO stretches to (140 / 500) x 365 = 102.2 days, and the markdown risk grows with it.
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.