Calculating DIO, or Day's Inventory Outstanding is very important in calculating the growth of the business as well as management. You may want to adjust your purchases to match the rise of demand or lower to adjust to the lower demands. The calculation is very simple and will take no more than 5 minutes if you have all the information at hand. No skills beyond a basic understanding of addition and division is necessary.
Items you will need
- Beginning inventory
- Ending inventory
- Cost of goods per day
Calculate your beginning inventory by checking the value of your goods at the start of the day. Calculate your ending inventory by checking the value of your goods at the end of the day. Calculate the cost of goods per day by taking your monthly cost and divide that by the number of days in that month.
Add beginning inventory to ending inventory. Divide that number by 2. That is your average inventory.
Take your average inventory and divide that by the cost of goods per day.
The equation is: ( ( beginning inventory + ending inventory ) / 2 ) / cost of goods per day
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