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?

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated as cost of goods sold divided by average inventory. Here, it's $10 million / $2 million = 5 times per year. To find the days inventory stays on premises, divide 365 days by the turnover ratio: 365 / 5 = 73 days.

A Firm Reported Year-End Cost of Goods Sold of $10