DAYS SALES OF INVENTORY - DSI

A method used by companies to measure its performance and it will give the investors to have an idea of how long the company will turn it inventory into sales. It includes goods that are works in progress.

Generally, the lower (shorter) the DSI the better, but it is important to note that the average DSI varies from one industry to another.

Also known as days inventory outstanding (DIO).This measure is one part of the cash conversion cycle, which represents the process of turning raw materials into cash. The days sales of inventory is the first stage in that process. The other two stages are days sales outstanding and days payable outstanding. The first measures how long it takes a company to receive payment on accounts receivable, while the second measures how long it takes a company to pay off its accounts payable.

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