Dividing ending inventory by cost of goods sold and multiplying the result by 365 is equal to the:
A)Inventory turnover ratio.
B)Profit margin.
C)Days' sales in inventory.
D)Current ratio.
E)Total asset turnover.

Question

Quizplus · Accepted Answer

Dividing ending inventory by cost of goods sold gives the inventory turnover ratio. Multiplying it by 365 gives the number of days' sales in inventory, which measures how long a company takes to turn its inventory into sales.

Dividing Ending Inventory by Cost of Goods Sold and Multiplying