Question

In: Finance

Company name Inventory turnover ratio Sales Annually Daily cost of goods sold A 5.5 $20,500,000 $20,000...

Company name Inventory turnover ratio Sales Annually Daily cost of goods sold
A 5.5 $20,500,000 $20,000
B 7.8 $10,000,000 $5,000
C 3.9 $17,580,000 $15,000

Calculate the inventory conversion cycle for Company A. (hint: First find the dollar amount of inventories. Consider the inventory turnover ratio)

A.

181 days

B.

187 days

C.

185 days

D.

183 days

E.

179 days

Solutions

Expert Solution

B 187 days

Average inventory = Sales / Inventory turnover ratio

= 20,500,000/5.5

= 3,727,272.727

Inventory conversion cycle = Average inventory/ cost of goods sold per day

= 3,727,272.727/ 20000

= 186.36

rounded off to 187 days


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