Days inventory outstanding

Days inventory outstanding measures, on average, how many days it takes a company to sell through its inventory. It is calculated as inventory divided by cost of goods sold, multiplied by the number of days in the period.

It expresses the same underlying idea as inventory turnover, but in days rather than the number of times inventory turns over in a year, which some investors find more intuitive to compare across companies. A lower days inventory outstanding generally means inventory is moving faster, which is usually a good sign as long as it is not being achieved by understocking and risking lost sales.