ALT had $25 million in sales last year.Its cost of goods sold was $15 million and its average inventory balance was $3 million.What was its average days of inventory?

Question

Quizplus · Accepted Answer

To calculate the average days of inventory, you first find the inventory turnover ratio, which is the cost of goods sold divided by the average inventory. Here, it's $15 million / $3 million = 5. Then, to find the average days of inventory, you divide the number of days in a year (365) by the inventory turnover ratio. So, 365 / 5 = 73.0 days.

ALT Had $25 Million in Sales Last Year