Days of Inventory
The average number of days inventory sits in stock before selling.
Formula
The average number of days inventory sits in stock before selling.
Why It Matters
Days of Inventory (DOI) shows how long your cash is tied up in products. Lower DOI means faster cash conversion. It's easier to intuit than turnover ratio—'45 days of stock' is more tangible than '8x turnover.' Use it for cash flow planning and inventory health monitoring.
Formula
Practical Example
Scenario
A jewelry brand tracks days of inventory to manage cash flow for a new product launch.
Calculation
Current inventory: $180,000. Monthly COGS: $42,000. DOI = $180,000 / ($42,000 × 12) × 365 = 130 daysResult
130 days of inventory is high—over 4 months of stock. Reducing to 75 days would free up $80,000 cash for the new launch investment.
Pro Tips
- 1Target DOI based on lead time + safety buffer (30-60 days for most D2C)
- 2Track DOI by SKU to identify outliers hoarding capital
- 3Compare DOI to payment terms—if DOI is 90 days but you pay in 30, you're financing inventory
- 4DOI should decrease as you improve forecasting and supplier relationships
Common Mistakes to Avoid
Frequently asked questions
Put it to work
Related Terms
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