The financial records of Del Ltd reveal the following at 30 June 2016: I
-f Del Ltd reduces the number of days' inventory on hand to 60,what will be the new inventory turnover?

Question

The financial records of Del Ltd reveal the following at 30 June 2016:  I
-f Del Ltd reduces the number of days' inventory on hand to 60,what will be the new inventory turnover?

Quizplus · Accepted Answer

Inventory turnover is calculated as the cost of goods sold divided by the average inventory. Another way to understand inventory turnover is how many times a company sells and replaces its stock of goods in a period. If Del Ltd reduces its days' inventory on hand to 60, it means the company will sell and replace its inventory every 60 days. Since there are 365 days in a year, dividing 365 by 60 gives approximately 6.08, which rounds to 6 times per annum. This indicates the inventory is turned over 6 times a year.

The Financial Records of Del Ltd Reveal the Following at 30