GLOSSARY
Inventory finance glossary.
Definitions calibrated for finance teams, not first-time readers. Computed terms link to the relevant calculator.
| Term | Definition |
|---|---|
| COGS | Cost of goods sold. The cost basis of inventory that has been sold inside the reporting period. Numerator of the COGS-based turnover ratio. |
| DIO | Days inventory outstanding. 365 divided by inventory turnover. The day-equivalent of the ratio. |
| DSO | Days sales outstanding. Average days to collect a receivable. |
| DPO | Days payable outstanding. Average days to pay a supplier. |
| CCC | Cash conversion cycle. DIO plus DSO minus DPO. |
| Safety stock | Buffer inventory held to protect the service level inside a lead time. Sized by Z × demand standard deviation × square root of lead time. |
| EOQ | Economic order quantity. The order size that minimises the sum of holding and order costs. |
| Reorder point | On-hand quantity at which the next order is placed. Lead-time demand plus safety stock. |
| Obsolescence reserve | Contra-asset account that reduces inventory carrying value to net realizable value under ASC 330. |
| Lower of cost or NRV | ASC 330-10-35 measurement rule for inventory carrying value. |
| DSCR | Debt service coverage ratio. Cash available for debt service divided by debt service. Common loan covenant. |
| Current ratio | Current assets divided by current liabilities. Liquidity covenant. |
| Borrowing base | Inventory and receivables eligible for collateral on an asset-based revolver. |
| Fill rate | Percentage of customer orders shipped complete on first attempt. |