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Accounting

How are days’ sales in inventory calculated, and what does it measure?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter6: Receivables And Inventories

Section: Chapter Questions

Problem 18CDQ

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Question

How are days’ sales in inventory calculated, and what does it measure?

Expert Solution

Step 1

Numbers of days to sell inventory: This ratio is determined as the number of days a particular company takes to make sales of the inventory available with them.

Number of days sales inventory = Number of days in the year / Inventory turnover

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