Asked by Mikayla Pearson on May 20, 2024
Verified
Dividing ending inventory by cost of goods sold and multiplying the result by 365 is the:
A) Inventory turnover ratio.
B) Profit margin.
C) Days' sales in inventory.
D) Current ratio.
E) Total asset turnover.
Days' Sales in Inventory
A financial metric indicating the average number of days a company takes to sell its inventory.
Ending Inventory
The cumulative worth of merchandise ready for sale at the conclusion of a financial period.
Cost of Goods Sold
The direct costs attributable to the production of the goods sold by a company, including material and labor expenses.
- Gain an understanding of the principle and relevance of days' sales uncollected along with days' sales in inventory in business practices.
Verified Answer
NH
Nguyen HalinaMay 25, 2024
Final Answer :
C
Explanation :
Dividing ending inventory by cost of goods sold gives us the inventory turnover ratio. Multiplying it by 365 gives us the number of days' sales in inventory, which represents the average number of days it takes for a company to sell its inventory.
Learning Objectives
- Gain an understanding of the principle and relevance of days' sales uncollected along with days' sales in inventory in business practices.