Inventory finance
Days Inventory Outstanding (DIO)
By the Supply Chain Manager team · Updated October 16, 2026
Days inventory outstanding (DIO) is the average number of days a business holds inventory before selling it, based on cost of goods sold.
It is inventory turnover expressed in days, and a finance measure for the whole business or a category. Days of supply, by contrast, looks forward at a single SKU's stock against its recent sales pace.
Because DIO uses cost of goods sold, it is an average across the whole range. A healthy company-wide DIO can hide a few categories that hold a year of stock and others that turn every two weeks. Breaking it down by category or supplier shows where the cash is actually sitting.
How to calculate DIO
DIO = Average Inventory ÷ Cost of Goods Sold × 365
DIO example
Illustrative numbers: average inventory of $600,000 and annual COGS of $3.6 million give DIO = 600,000 ÷ 3,600,000 × 365 ≈ 61 days.
Why DIO matters for distributors
DIO is one of the three parts of the cash-to-cash cycle. Each day cut from DIO is a day less of inventory your business has to fund.
Common DIO mistakes
- Using period-end inventory instead of an average, which swings with seasonal timing.
- Confusing DIO with SKU-level days of supply.
Examples on this page use made-up round numbers to show the calculation. They are not benchmarks or results from real businesses.