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Inventory Turnover and Days’ Sales in Inventory – W. Glass & Company reported the following information...

Inventory Turnover and Days’ Sales in Inventory – W. Glass & Company reported the following information in its recent annual report:

2015

2016

Cost of goods sold

$4,000,000

$4,600,000

Beginning inventory

$900,000

860,000

Ending inventory

860,000

640,000

Calculate the company’s inventory turnover and days’ sales in inventory for both years.

Solutions

Expert Solution

Inventory turnover = Cost of goods sold / Average inventory

Days’ sales in inventory = 365 / Inventory turnover

2015:

Inventory turnover = $4,000,000 / [($900,000 + $860,000) / 2] = 4.55

Days’ sales in inventory = 365 / 4.55 = 80.3 days

2016:

Inventory turnover = $4,600,000 / [($860,000 + $640,000) / 2] = 6.13

Days’ sales in inventory = 365 / 6.13 = 59.5 days

ekkarill92 answered 3 years ago
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