1. What Are DIO, DSO, and DPO?

DIO (Days Inventory Outstanding), DSO (Days Sales Outstanding), and DPO (Days Payable Outstanding) are key financial metrics that measure a company's operational efficiency in managing inventory, collecting receivables, and paying suppliers.

2. How the Calculator Works

The calculator uses these formulas:

Where:

• Inventory — Value of current inventory
• COGS — Cost of Goods Sold for the period
• Accounts Receivable — Amount owed by customers
• Sales — Total sales revenue
• Accounts Payable — Amount owed to suppliers

Explanation: These metrics convert financial statement values into days, showing how long inventory is held, how quickly sales are collected, and how long payments to suppliers are delayed.

3. Importance of These Metrics

Details: Together these metrics form the cash conversion cycle, showing how efficiently a company manages its working capital. Lower DIO/DSO and higher DPO generally indicate better cash flow management.

4. Using the Calculator

Tips: Enter all values in the same currency. Use annual figures or adjust the 365-day factor if using different time periods. All values must be positive (COGS and Sales must be > 0).

5. Frequently Asked Questions (FAQ)

Q1: What is a good DIO value?
A: It varies by industry, but generally lower is better. Retail might have DIO of 30-60 days while manufacturing might be 60-90 days.

Q2: Why is DSO important?
A: DSO shows how quickly you collect payments. High DSO may indicate collection problems or overly generous credit terms.

Q3: Is higher DPO always better?
A: While higher DPO improves cash flow, excessively high DPO may strain supplier relationships or indicate cash flow problems.

Q4: How are these metrics related?
A: Cash Conversion Cycle = DIO + DSO - DPO. This shows how many days a company's cash is tied up in operations.

Q5: What time period should I use?
A: Typically annual figures, but you can use quarterly figures with 91.25 days (365/4) instead of 365 for the calculation.