DSI tells you how many days of current sales are sitting on your shelves in inventory form. Most articles report the number as if it stands alone; in practice, the right interpretation depends on your category, your product mix, your seasonality, and your cost of capital. This calculator computes DSI, then tells you what it actually means in dollars for your business.
DSI = (average inventory / COGS) × period days. If you have $200,000 in average inventory, $1.2M in annual COGS, and use a 365-day period, your DSI is about 61 days. Every dollar of sales requires 61 days of inventory sitting on the shelf before it can be recognized.
The cash-flow interpretation matters because each day of inventory is a day where your money is locked up. Multiply DSI by daily COGS to get a dollar figure, then by your cost of capital (typically 6-12%) to get the annual carrying-cost consequence.