Days' sales in inventory
A) Is a ratio that estimates how many days it will take to convert inventory on hand to accounts receivable or cash
B) Is a ratio that tells us how much inventory a firm has on hand in terms of days' sales
C) Is the number of days we can sell from inventory if no new items are purchased
D) All of the above
E) Is a ratio that estimates how many days it will take to convert inventory on hand to accounts receivable or cash and is a ratio that tells us how much inventory a firm has on hand in terms of days' sales

Question

Quizplus · Accepted Answer

Days' sales in inventory is a financial ratio that provides insight into how efficiently a company manages its inventory. It estimates the number of days it will take to convert the inventory into accounts receivable or cash, indicating how much inventory is available in terms of days' sales, and represents the number of days a company can continue to sell goods without restocking, assuming no new purchases are made. Therefore, all the descriptions provided in options A, B, and C are correct aspects of the days' sales in inventory ratio.

Days' Sales in Inventory