Which metric expresses days of inventory outstanding?

• A. DSO
• B. DIO
• C. DPO
• D. CCC

Answer: (B)

Days of Inventory Outstanding shows how long, on average, inventory sits before it is sold. It answers how many days the company holds onto its stock before turning it into cost of goods sold. The usual formula is DIO = (Average Inventory / Cost of Goods Sold) × 365, or equivalently DIO = 365 / Inventory Turnover, where Inventory Turnover = COGS / Average Inventory. A higher DIO indicates slower inventory movement and more capital tied up in stock, while a lower DIO means more efficient inventory management.

Other metrics measure different things: Days Sales Outstanding tracks how long customers take to pay, while Days Payable Outstanding tracks how long the company takes to pay suppliers. The Cash Conversion Cycle combines multiple components (DIO + DSO − DPO) to show net time between cash outlays and cash inflows, not the inventory days alone.