Question

A company has an inventory turnover ratio of 5. Assuming 360 days in a year, how long, on average, does it take the company to sell its inventory (to the nearest day)?

Answer 1

The inventory turnover ratio is calculated by dividing the cost of goods sold (COGS) by the average inventory.

In this case, we are given the inventory turnover ratio of 5. To find the average number of days it takes for the company to sell its inventory, we need to divide the number of days in a year (360) by the inventory turnover ratio.

So, the average number of days it takes for the company to sell its inventory is:

360 / 5 = 72 days

Therefore, it takes the company, on average, 72 days to sell its inventory.

I hope this explanation helps! If you have any more questions, feel free to ask.

Step-by-step explanation:

Answer 2

To find out how long it takes for a company with an inventory turnover ratio of 5 to sell its inventory, you divide 360 days by 5, resulting in an average inventory period of 72 days.

Step-by-step explanation:

The inventory turnover ratio is an important metric in business, indicating how many times a company sells and replaces its inventory within a certain period. If a company has an inventory turnover ratio of 5, this means it sells all its inventory 5 times over the course of a year. Assuming the year has 360 days, we calculate the average inventory period by dividing the number of days in the year by the inventory turnover ratio.

The formula to calculate the average time to sell inventory is:

Average Inventory Period = 360 days / Inventory Turnover Ratio

Therefore:

Average Inventory Period = 360 days / 5

Average Inventory Period = 72 days

This means, on average, it takes the company 72 days to sell its inventory.