Days of Inventory on Hand (DIOH) is calculated as 365 divided by inventory turnover. If inventory turnover increases, what happens to DIOH?

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Multiple Choice

Days of Inventory on Hand (DIOH) is calculated as 365 divided by inventory turnover. If inventory turnover increases, what happens to DIOH?

Explanation:
DIOH shows how many days, on average, inventory sits before it’s sold, and it moves inversely with inventory turnover. Since DIOH equals 365 divided by turnover, when turnover goes up, the denominator gets larger and the overall value gets smaller. In other words, faster inventory movement leads to fewer days of on-hand inventory. For example, increasing turnover from 2 to 4 cuts DIOH roughly in half (from about 182.5 days to 91.25 days).

DIOH shows how many days, on average, inventory sits before it’s sold, and it moves inversely with inventory turnover. Since DIOH equals 365 divided by turnover, when turnover goes up, the denominator gets larger and the overall value gets smaller. In other words, faster inventory movement leads to fewer days of on-hand inventory. For example, increasing turnover from 2 to 4 cuts DIOH roughly in half (from about 182.5 days to 91.25 days).

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