Inventory turnover vs days inventory
Inventory turnover is 365 divided by days inventory outstanding. A DIO of 60 days is 6.08 turns a year. DIO 20 is 18.25 turns. They are one clock written as a wait and as a rate of turns.
| Inventory turnover | Days inventory outstanding | |
|---|---|---|
| Formula | 365 / DIO. | DIO, typed in. Usually inventory over daily cost of goods. |
| First sheet | 365 / 60 = 6.08 turns. | DIO 60. Plus DSO 45 is a 105 day operating cycle. CCC 75. |
| Fast stock | 365 / 20 = 18.25 turns. | DIO 20. Operating cycle 50 with DSO 30. CCC minus 50 after DPO 100. |
| Equal clocks | 365 / 40 = 9.125 turns. | DIO 40. Operating cycle 80. CCC 40. |
| 360 day year | 360 / 60 = 6 exactly, a different convention. | DIO is still 60. Only the invert changed. |
| When you would pick it | A turns ranking inside a sector. | The days sitting in the operating cycle. |
On this page
One clock, two printings
6.08 turns and 60 days are . How inventory turnover works is the invert. How the cash conversion cycle works is the days. The cash conversion cycle calculator takes DIO as an input and does not compute it from a ledger.
How the operating cycle works is DSO plus that DIO.
Name the year
A 360 day year prints 6 turns on a 60 day DIO. A 365 day year prints 6.08. Mixing them is a fake ranking. This is educational material, not financial advice.
Worked examples
60 days, 6.08 turns
DSO 45, DIO 60, DPO 30. Turnover on a 365 day year?
- Turnover 6.08.
- Operating cycle 105 days. CCC 75 days.
Inventory turnover is 6.08 times a year. DIO is 60. Operating cycle 105 days. CCC 75 days.
20 days, 18.25 turns
DSO 30, DIO 20, DPO 100. Turnover?
- Turnover 18.25.
- Operating cycle 50 days. CCC minus 50 days.
Inventory turnover is 18.25 times a year. DIO is 20. Operating cycle 50 days. CCC minus 50 days.
40 days, 9.125 turns
DSO 40, DIO 40, DPO 40. Turnover?
- Turnover 9.125.
- Operating cycle 80 days. CCC 40 days.
Inventory turnover is 9.125 times a year. DIO is 40. Operating cycle 80 days. CCC 40 days.
Common questions
Which one should I quote?
They are one clock. Quote both, or name which invert you used and whether the year is 365 or 360.
Is a higher turnover always better?
It is a shorter wait. It can also be a stockout.
Does this page compute DIO from inventory?
No. DIO is an input. This is educational material, not financial advice.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.