Question

Firth Company's annual report shows an average inventory balance of $40,000 and cost of goods sold of $200,000. Total assets amount to $400,000 and liabilities amount to $100,000. Based on this information (treat any partial day as a whole day)

a. The average number of days to sell inventory is 35.
b. The average number of days to sell inventory is 73.
c. the inventory turnover is 10.
d. the inventory turnover is 2.5.

Answer 1

The average number of days to sell inventory is 73.

Step-by-step explanation:

The inventory turnover is calculated by dividing the cost of goods sold by the average inventory balance. In this case, the cost of goods sold is $200,000 and the average inventory balance is $40,000. So, the inventory turnover is $200,000 / $40,000 = 5.

The average number of days to sell inventory can be calculated by dividing the number of days in a year by the inventory turnover. There are 365 days in a year, so the average number of days to sell inventory is 365 / 5 = 73.

Therefore, the correct answer is Option B: The average number of days to sell inventory is 73.