Days inventory outstanding (DIO) is the average number of days a business holds inventory before it sells. It links two figures from your financials: the average value of inventory on hand and the cost of goods sold (COGS) over a period. A lower DIO means stock moves quickly and less cash sits frozen in the warehouse. A higher DIO means capital is tied up in goods that have not yet turned into revenue.
How it works
The standard formula is:
DIO = (Average inventory / COGS) x number of days in the period
Average inventory is usually the opening balance plus the closing balance, divided by two. The period is typically 365 days for a year or 90 for a quarter. For example, if your average inventory is 200,000 and annual COGS is 1,000,000, then DIO = (200,000 / 1,000,000) x 365, or about 73 days. On average, a unit sits in stock for roughly 73 days before selling.
Why it matters
DIO is a working capital signal. Every day of inventory is cash you have paid for but not yet recovered. It is one of the three parts of the cash conversion cycle, alongside days sales outstanding and days payable outstanding. Watching DIO helps you spot slow-moving SKUs, overordering, and demand that has softened before it shows up elsewhere.
Where it fits in B2B quoting
Wholesale and B2B orders are often larger and less predictable than direct-to-consumer sales, so a few big deals can swing your inventory turns. If you quote from stock, quote acceptance rates and lead times feed directly into how long goods sit. Faster quote-to-order cycles pull DIO down because accepted quotes convert holdings into revenue sooner. For related terms, see the B2B quoting glossary.