1. What is Days Sales in Inventory (DSI)?

Definition: DSI measures the average time in days that a company takes to turn its inventory into sales.

Purpose: It helps businesses evaluate inventory management efficiency and liquidity of inventory.

2. How Does the DSI Calculator Work?

The calculator uses the formula:

Where:

• \( DSI \) — Days Sales in Inventory (days)
• \( \text{Average Inventory} \) — Average inventory value during the period ($)
• \( \text{Cost of Goods Sold} \) — Total cost of goods sold during the period ($)
• \( \text{Number of Days} \) — Time period being analyzed (typically 365 days for annual)

Explanation: The ratio shows how many days' worth of inventory the company has on hand based on current sales rates.

3. Importance of DSI Calculation

Details: A lower DSI indicates more efficient inventory management, while a higher DSI may suggest overstocking or slow-moving inventory.

4. Using the Calculator

Tips: Enter the average inventory value, cost of goods sold (both in dollars), and time period in days (default 365). All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: What's a good DSI value?
A: Ideal DSI varies by industry. Compare with industry averages or historical company performance.

Q2: How do I calculate average inventory?
A: Typically (Beginning Inventory + Ending Inventory) / 2 for the period.

Q3: Why use COGS instead of sales?
A: COGS better reflects the actual cost of inventory sold, as sales include markup.

Q4: What if my period isn't annual?
A: Change the "Number of Days" to match your period (e.g., 90 for quarterly).

Q5: How does DSI differ from inventory turnover?
A: DSI shows days to sell inventory, while turnover shows how many times inventory is sold/replaced in a period.