On its own, it's not. 'But that's ridiculous,' some financial analysts might say. 'When comparing two very similar companies selling two very similar products, the one with the lower DII is almost invariably the company with more efficient inventory management!' And that's true, but only because most companies don't treat DII as their most important metric. That is, it's useful as a way to observe business as usual, but it's easy to “game” DII — i.e., artificially increase or decrease it — in a way that isn't actually good for business. Think about what would happen if a company incentivized its employees to minimize DII numbers above all else: The company would constantly be running out of stock, disappointing customers and missing out on sales because employees would be loath to stock anything they weren't confident would sell immediately. This isn't to say DII isn't useful, but it has to be interpreted in a larger context. In general, a lower DII is better. It means less cash is tied up in inventory and a business is doing a good job selling what it has. But be careful not to paint with too broad a brush. There are good reasons why a company might make a decision that would increase DII. If supply chain issues make it harder to restock in a timely way, companies may want to keep more inventory on hand. If suppliers give price breaks at certain volume thresholds, the cost of having more inventory on hand may be well worth the discount for buying more. If being out of stock even once could cause you to lose customers, you'll be more likely to want extra inventory on hand.