Question

Syed's industries has accounts receivable of $700, inventory of $1,200, sales of $4,200, and cost of goods sold of $3,500. how long does it take syed's to both sell its inventory and then collect the payment on the sale?

Answer 1

In order to find Inventory in days we may use the below formula:

Inventory in Days=
`(365)/(Inventory Turnover Ratio)`

Inventory TurnOver Ratio=
`(Cost of Goods Sold)/(Inventory)`

Inventory Turnover Ratio=
`(3500)/(1200)`

Inventory Turnover Ratio=2.9166

Inventory in Days=
`(365)/(2.91666)`

Inventory in Days= 125 Days(Approximately)

Days in Accounts Receivable =
`(365)/(Accounts Recievable Turnover)`

Accounts Receivable Turnover=
`(Sales)/(Accounts Receivable)`

Accounts Receivable Turnover=
`(4200)/(700)`

Accounts Receivable Turnover=6

Accounts Receivable in Days=
`(365)/(6)`

Accounts Receivable in days=60.83 days|(approx)