DYK: DIO, Days Inventory Outstanding

Days Inventory Outstanding (DIO) is a financial ratio for any company that has inventory. It shows how quickly the company, management, can turn inventories into cash or sales. Generally speaking, a decrease in DIO is an improvement to working capital. That is because this number indicates how long a company’s cash is tied up in its inventory. The higher the number, the longer a company holds on to its inventory, the more chances it has of losing money on that investment. Items in inventory have the potential to become outdated, expire or be subject to falling prices; all of which devalues company inventory.

By | 2018-01-31T17:41:18-05:00 April 12th, 2016|