Days inventory outstanding

How long stock sits before it is sold - inventory divided by cost of goods sold, times 365.

Example

Northgate's 800,000 over 2,520,000 times 365 is 115.9 days, against 106.0 days a year earlier.

Important

Measured against cost of goods sold, not revenue, because stock is carried at cost. Rising days usually mean goods are not selling, which is a demand signal before it is a funding one.

Related terms

• Inventory — Goods a business has bought or made and has not yet sold - raw materials, work in progress and finished stock.
• Cash conversion cycle — The number of days between money leaving the business to buy or make something and money arriving from the customer who bought it. Days of receivables plus days of inventory minus days of payables.
• Cost of goods sold — The direct cost of producing or delivering what was sold in the period - materials, the labour that makes the product, and whatever else the company places above the gross profit line.

Lessons that explain it

• Working capital: the cash growth eats — Between selling something and being paid for it, a business funds the gap out of its own pocket. Working capital is the size of that gap, and it is why growing companies run out of money. (11 min)

All 578 terms in the Investing glossary