Question

Beckenworth had cost of goods sold of $10,721 million, ending inventory of $3,389 million, and average inventory of $2,095 million. Its days' sales in inventory equals:(Use 365 days a year.)

a. 0.3 days.

b. 115.4 days.

c. 44.0 days.

d. 43.8 days.

e. 71.3 days.

Answer 1

b. 115.4 days.

Step-by-step explanation:

Days' sales in inventory is a financial ratio that shows the number of days it took a company to sell its inventory during a given period. It shows how quickly a company is able to convert inventory to cash.

Days' sales in inventory may be computed by dividing the number of days in the given period by the inventory turnover ratio. Where the inventory turnover ratio is the ratio of cost of sales to ending inventory.

Days' sales in inventory

= 365/($10,721 million/$3,389 million)

= 115.37 days.

Answer 2

The correct option is B,115.4 days as shown in the calculation below.

Step-by-step explanation:

The formula for days sales in inventory is given as:

Days sales in inventory=ending inventory/ cost of goods sold*365 days

ending inventory is $3,389 million

costs of good sold is $10,721 million

days sales in inventory=$3,389 million/$10,721 million*365 days

=115.4 days

The implies the days inventory stays in the business prior to being sold to customers, a days sales in inventory of 115.4 days may suggest slow-moving or obsolete inventory that require that management should pay close attention to.