![]() ![]() The article on inventory turnover provides a more complete discussion of issues related to the diagnosis of inventory effectiveness, although it does not provide these synonyms. The company wants to measure how many times it paid its creditors over the fiscal year. ![]() Accounts payable at the beginning and end of the year were 12,555 and 25,121, respectively. Company A reported annual purchases on credit of 123,555 and returns of 10,000 during the year ended December 31, 2017. ![]() Conversely, another method to calculate DIO is to divide 365 days by the inventory turnover ratio. Example of Accounts Payable Turnover Ratio. Inventory levels (measured at cost) are divided by sales per day (also measured at cost rather than selling price.)ĭ I I = a v e r a g e i n v e n t o r y C O G S / D a y s Days Inventory Outstanding (DIO) (Average Inventory ÷ Cost of Goods Sold) × 365 Days. The ratio measures the number of days funds are tied up in inventory. Days in inventory (also known as "Inventory Days of Supply", "Days Inventory Outstanding" or the "Inventory Period" ) is an efficiency ratio that measures the average number of days the company holds its inventory before selling it. ![]()
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