Dividing ending Inventory by Cost of Goods Sold and multiplying the result by 365 is the:
A)Inventory turnover ratio.
B)Profit margin.
C)Days' sales in inventory.
D)Current ratio.
E)Total asset turnover.

Question

Quizplus · Accepted Answer

Dividing ending inventory by cost of goods sold gives us the inventory turnover ratio. Multiplying this by 365 gives us the days' sales in inventory, which represents the number of days it takes for a company to sell its entire inventory. Therefore, the correct answer is option C.

Dividing Ending Inventory by Cost of Goods Sold and Multiplying