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What Is 'Days Sales of Inventory - DSI': CCC Dio + Dso - Dpo

CCC = DIO + DSO - DPO The document defines the terms Days Sales of Inventory (DSI), Days Sales Outstanding (DSO), and Days Payable Outstanding (DPO). DSI measures how long it takes a company to turn inventory into sales. DSO measures the average number of days it takes a company to collect revenue after a sale. DPO is a company's average payable period and measures how long it takes a company to pay its suppliers. These three terms are components of the cash conversion cycle (CCC) formula, where CCC equals DIO plus DSO minus DPO.

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176 views2 pages

What Is 'Days Sales of Inventory - DSI': CCC Dio + Dso - Dpo

CCC = DIO + DSO - DPO The document defines the terms Days Sales of Inventory (DSI), Days Sales Outstanding (DSO), and Days Payable Outstanding (DPO). DSI measures how long it takes a company to turn inventory into sales. DSO measures the average number of days it takes a company to collect revenue after a sale. DPO is a company's average payable period and measures how long it takes a company to pay its suppliers. These three terms are components of the cash conversion cycle (CCC) formula, where CCC equals DIO plus DSO minus DPO.

Uploaded by

mukta
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CCC = DIO + DSO - DPO

What is 'Days Sales Of Inventory - DSI'


The days sales of inventory value, or DSI, is a financial measure of a company's
performance that gives investors an idea of how long it takes a company to turn its inventory
(including goods that are a work in progress, if applicable) into sales. Generally, a lower
(shorter) DSI is preferred, but it is important to note that the average DSI varies from one
industry to another.

Here is how the DSI is calculated:

What is 'Days Sales Outstanding - DSO'

Days sales outstanding (DSO) is a measure of the average number of days that a company
takes to collect revenue after a sale has been made. DSO is often determined on a
monthly, quarterly or annual basis and can be calculated by dividing the amount of accounts
receivable during a given period by the total value of credit sales during the same period,
and multiplying the result by the number of days in the period measured.

The formula for calculating days sales outstanding can be represented with the following
formula:
A low DSO value means that it takes a company fewer days to collect its accounts
receivable. A high DSO number shows that a company is selling its product to customers on
credit and taking longer to collect money.

Days sales outstanding is also often referred to as days receivables and is an element of
the cash conversion cycle.

What is 'Days Payable Outstanding - DPO'

Days payable outstanding (DPO) is a company's average payable period. Days payable
outstanding tells how long it takes a company to pay its invoices from trade creditors, such
as suppliers. DPO is typically looked at either quarterly or yearly.

The formula to calculate DPO is written as: ending accounts payable / (cost of sales/number
of days). These numbers are found on the balance sheet and the income statement.

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