What are Days Sales of Inventory (DSI)?
Days Sales of Inventory (DSI), also known as Days Inventory Outstanding (DIO), is a financial metric used to evaluate how efficiently a company manages its inventory. It measures the average number of days it takes for a company to sell its entire inventory stock. A lower DSI indicates that a company is selling its inventory more quickly, which is generally considered more favorable as it suggests efficient inventory management and better cash flow. Conversely, a higher DSI may indicate slower inventory turnover and potential issues such as overstocking or slowing sales.
Geeky Takeaways:
- DSI is commonly used by analysts, investors, and businesses to assess inventory management efficiency, identify potential operational inefficiencies, and compare performance across companies or industries.
- It provides valuable insights into how effectively a company is utilizing its inventory resources to generate sales.
Table of Content
- Days Sales of Inventory Formula
- Importance of Days Sales of Inventory
- Example of Days Sales of Inventory
- Days Sales of Inventory Analysis
- Indications of Low Days Sales of Inventory
- Indications of High Days Sales of Inventory
- Importance of Days Sales Inventory to Businesses
- Importance of Days Sales Inventory to Investors
- Comparing the DSI Ratio with Other Financial Ratios
- Days of Sales of Inventory vs. Inventory Turnover
- Days Sales of Inventory – FAQs