In: Finance
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 |
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