If a firm's inventory turnover is 4 and days sales outstanding (average collection period)is 60, then it takes approximately five months for newly acquired inventory to generate cash.

Question

Quizplus · Accepted Answer

Inventory turnover of 4 means inventory is sold every 3 months (12 months/4). Adding 60 days (2 months) for collection, it takes approximately 5 months to generate cash.

If a Firm's Inventory Turnover Is 4 and Days Sales