It is an inventory/financial analysis that calculates how many days the relevant stock is converted into sales/production and, therefore, the liquidity of the stock, also known as the Average Stock Age.
DSI is also part of the Cash Flow Cycle Analysis.
Formula;
DSI = ( End of Period Inventory Amount / Cost of Sales ) x 360 or 365 days
The resulting figure shows how many days the relevant stock was reset/sold/converted.
The resulting number is considered as an indicator of;
Low => Danger of insufficient stock
High => High inventory holding cost
Of course, it is necessary to compare it with the industry standard and competitor company figures and consider the determined business type (Business Model).
As with any other analysis, DSI alone cannot paint a meaningful picture. For this, different analysis methods should also be used.
For example;
In addition, different criteria such as drought, virus, war, and possible regulations should be evaluated.
References
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