Question

A firm reported year-end cost of goods sold of $10 million. It listed $2 million of inventory on its balance sheet. Using a 365-day year, how many days did the firm's inventory stay on the premises?

Answer 1

Days on Inventory: 73

Step-by-step explanation:

First step, calculate the Inventory Turnover

`(Sales)/(Average Inventory) = $Inventory Turnover`

​Where:

In this case we are given with only one inventory so we work with that.

Sales 10

Inventory 2

`(10)/(2) = $Inventory Turnover`

Inventory TO 5

The company sales their inventory 5 times per year

Next, we calculate the days on inventory

`(365)/(Inventory TO) = $Days on Inventory`

Inventory TO 5

Year 365

`(365)/(5) = $Days on Inventory`

Days on Inventory: 73