A firm reported year-end sales of $20 million. It listed $7 million of inventory on its balance sheet. Using a 365-day year, how many days did the firm's inventory stay on the premises?
A) 127.75 days
B) 157.75 days
C) 97.75 days
D) 87.75 days

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated as sales divided by inventory. Here, it's $20 million / $7 million = 2.857. To find the days inventory stays on premises, divide 365 by the turnover ratio, which gives 365 / 2.857 = 127.75 days.

A Firm Reported Year-End Sales of $20 Million