Prior experience in inventory turnover days, combined with knowledge of cost of sales, can be useful in estimating current inventory levels.

Question

Quizplus · Accepted Answer

By using knowledge of inventory turnover days (the average number of days it takes for a company to sell and replace its inventory) and cost of sales (the direct cost of producing goods or services), one can estimate the current inventory levels of a company. This is because inventory turnover days can reveal how quickly a company is selling its inventory, and when combined with cost of sales can provide an estimate of the value of inventory being sold.

Prior Experience in Inventory Turnover Days, Combined with Knowledge of Cost