Consider a firm with a 2007 net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, how many weeks of supply does the firm hold?
A) 12.50
B) 5.20
C) 2.60
D) 0.08
E) 4.16

Question

Quizplus · Accepted Answer

Weeks of supply is calculated by dividing the inventory by the average weekly cost of goods sold. First, find the weekly cost of goods sold: $25 million / 52 weeks = $0.48 million per week. Then, divide the inventory amount by this weekly cost: $2 million / $0.48 million per week = 4.16 weeks.

Consider a Firm with a 2007 Net Income of $20