From the course: Corporate Financial Statement Analysis
Join today to access over 22,600 courses taught by industry experts or purchase this course individually.
Days' sales of inventory (DSI)
From the course: Corporate Financial Statement Analysis
Days' sales of inventory (DSI)
- Now let's look at efficiency ratios. We have two efficiency ratios we're going to drill down on. Keep in mind there are others. But these two are perhaps the two that deserve the most attention. The first one is number of days' sales in inventory. And the second is average collection period. As a reminder number of days' sales in inventory tells me how long on average does my inventory stay with me until it's sold. The average collection period tells me, on average, how long from when I sell something on credit until I collect the cash. These two together, days' sales in inventory and average collection period indicate what we call the company's operating cycle. So let's look first at inventory turnover. We buy inventory and the question is, how long until we sell that inventory? Can we calculate on average how long our inventory sits in our store for example? Well, we have a measure for that. It's called days' sales in inventory and the first step in calculating days' sales in…
Practice while you learn with exercise files
Download the files the instructor uses to teach the course. Follow along and learn by watching, listening and practicing.
Download courses and learn on the go
Watch courses on your mobile device without an internet connection. Download courses using your iOS or Android LinkedIn Learning app.