Days' sales in inventory is calculated as:
A) Ending inventory divided by cost of goods sold.
B) Cost of goods sold divided by ending inventory.
C) Ending inventory divided by cost of goods sold times 365.
D) Cost of goods sold divided by ending inventory times 365.
E) Ending inventory times cost of goods sold.

Question

Quizplus · Accepted Answer

Days' sales in inventory is calculated by dividing the ending inventory by the cost of goods sold per day. To calculate the cost of goods sold per day, we divide cost of goods sold by 365 days. Therefore, the correct formula is Ending inventory / (Cost of goods sold / 365).

Days' Sales in Inventory Is Calculated As