Days Sales of Inventory (DSI)

The days sales of inventory (DSI) ratio is a measure of the average number of days it takes a company to sell its inventory. It is calculated by dividing the average inventory balance by the cost of goods sold per day. A higher DSI ratio indicates that a company is holding more inventory than it needs, which can lead to increased costs and lower profits. A lower DSI ratio indicates that a company is turning over its inventory more quickly, which can lead to increased sales and profits.

The DSI ratio is a useful tool for investors and analysts to assess a company's inventory management practices. A company with a high DSI ratio may be inefficient in its inventory management, which could lead to lost sales and profits. A company with a low DSI ratio may be too aggressive in its inventory management, which could lead to stockouts and lost sales.

The DSI ratio can be compared to the industry average to see how a company's inventory management practices compare to its peers. A company with a DSI ratio that is significantly higher or lower than the industry average may need to make changes to its inventory management practices.

The DSI ratio is also a useful tool for managers to track the performance of their inventory management practices over time. A company that is able to reduce its DSI ratio over time is likely to be more efficient in its inventory management, which can lead to increased sales and profits.

The DSI ratio is a valuable tool for investors, analysts, and managers to assess a company's inventory management practices. By understanding the DSI ratio, you can make better decisions about whether to invest in a company or how to improve your own inventory management practices.