Days' Sales in Inventory

In Management Accounting, Days' sales in inventory is also called Inventory Conversion Period. This is the measurement of time of converting bought or produced inventory into sales. It is important because by measuring this period, we can know whether it is more or less than normal period of conversion of inventory into sales. On this basis, we can take some good decisions.

It is good news if you see the short time period after calculation this. In short form, it is known as DSI. Following is its formula.

You can find inventory from balance sheet's closing stock and cost of goods sold from income statement.

For example, on above formula, it is 122 days but we have fixed stand is 100 days. Now, difference is 22 days. Now, we go to find the reasons behind this. Why did we not able to sell goods within the time limit of 100 days. Following may be the main reasons.

  • Our sales team is performing less. 
  • There is shortage of sales team. 
  • Market customers are buying our products less.
If we do not calculate above days through accounting ratio tool, we can not analyze the reason behind this. So, thanks accounting. Now, our managerial work is to motivate our sales team. Appoint new sales team. Motivate our customers for sales promotion. 

Long term benefits of calculating and Good decisions on this measurements

1.  Low the Cost 

This measurement is just any body test. If we diagnose the cancer in early age, we can treat it more fastly. Like this, if we measure it and take good decisions on this. Our conversion period will reach at lowest level. On this basis. we can decrease our inventory holding cost. 

2. Improve the Cash Inflow

We can improve our cash inflows. 

3. More Liquidity

If we have decrease these days, we can increase more liquidity. Inventory is the current asset and cash is also current asset. But cash is better than inventory because it liquid form and we can use it in emergency. 

4. Save From Theft and Fire

Inventory can be secure through deposit cash in bank. For its security, we need security gaurds. But still there is the risk of theft and fire. So, if days' sales in inventory is shorter, we can get benefit of saving inventory from theft and fire. 

Related : Days' Sales Uncollected


Comments on this Website
Share above Content to Your Friends


access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
Accounting Education: Days' Sales in Inventory
Days' Sales in Inventory
Accounting Education
Not found any lecture VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock