Days Sales Of Inventory - DSI

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DEFINITION of 'Days Sales Of Inventory - DSI'

A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory (including goods that are work in progress, if applicable) into sales. Generally, the lower (shorter) the DSI the better, but it is important to note that the average DSI varies from one industry to another.

Here is how the DSI is calculated: 

 

Days Sales Of Inventory (DSI)

Also known as days inventory outstanding (DIO).

INVESTOPEDIA EXPLAINS 'Days Sales Of Inventory - DSI'

This measure is one part of the cash conversion cycle, which represents the process of turning raw materials into cash. The days sales of inventory is the first stage in that process. The other two stages are days sales outstanding and days payable outstanding. The first measures how long it takes a company to receive payment on accounts receivable, while the second measures how long it takes a company to pay off its accounts payable.

Learn more about this inventory ratio in the FAQ How do I calculate the inventory turnover ratio?

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RELATED FAQS
  1. How should investors interpret a company's cash conversion cycle (CCC)?

    The cash conversion cycle (CCC) is a measure of liquidity that shows how quickly (or slowly) a company cycles between cash ... Read Full Answer >>
  2. How does inventory turnover affect the cash conversion cycle (CCC)?

    A higher, or quicker, inventory turnover decreases the cash conversion cycle (CCC). A lower, or slower, inventory turnover ... Read Full Answer >>
  3. What does days sales of inventory (DSI) represent as a ratio?

    The days sales of inventory (DSI) is a ratio intended to indicate how well or how poorly a company is functioning in terms ... Read Full Answer >>
  4. How do you find a company's days sales of inventory (DSI)?

    Using a simple formula, a company’s days sales of inventory (DSI) can be calculated as follows: Days sales of inventory = ... Read Full Answer >>
  5. What are red flags in a company's days sales of inventory?

    It's important to understand how a company treats inventory before you can effectively point to any red flags in days sales ... Read Full Answer >>
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