Big Foot Wholesalers has sales of $1,387,400, costs of goods sold of $891,400, inventory of $188,936, and accounts receivable of $94,800. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?

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Quizplus · Accepted Answer

To find the average days it takes for the firm to sell its inventory, we use the inventory turnover ratio and the days sales in inventory formula. First, calculate the inventory turnover ratio: Cost of Goods Sold / Average Inventory. Given that the costs of goods sold are $891,400 and the inventory is $188,936, the inventory turnover ratio is $891,400 / $188,936 = 4.72 times per year. Then, to find the days it takes to sell the inventory, we use the formula: 365 days / Inventory Turnover Ratio = 365 / 4.72 = 77.4 days.

Big Foot Wholesalers Has Sales of $1,387,400, Costs of Goods