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

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

jeff jeffy answered 2 years ago

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