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Explanation: Inventory Days, also known as Days Inventory Outstanding (DIO), measures the average number of days it takes for a company to sell its entire inventory. It is calculated by dividing the average inventory over a period by the cost of goods sold (COGS) per day. Inventory Days indicate how efficiently a company manages its inventory levels and reflects its ability to turn inventory into sales. A lower inventory days value suggests faster inventory turnover and more efficient inventory management.
Example: Maruti Suzuki has inventory days of 11.72 as of FY23. This means, on average, it takes Maruti Suzuki approximately 11.72 days to sell its entire inventory. A lower inventory days value indicates that Maruti Suzuki efficiently manages its inventory, swiftly converting it into sales. Efficient inventory management enables Maruti Suzuki to minimize carrying costs associated with holding inventory for extended periods and respond promptly to changes in market demand.
You can view the Inventory Days for any company on Radar under Cash Conversion Cycle in the Ratios section.