The formula for the average inventory turnover period in days is:
A) Cost of sales/Average inventory.
B) Average inventory held/Sales.
C) (Average inventory held/Cost of sales) × 365 .
D) none of the above.

Question

Quizplus · Accepted Answer

The formula for the average inventory turnover period in days is calculated by taking the average inventory held during a given period, dividing it by the cost of sales for that same period, and then multiplying the result by 365. This gives the average number of days it takes for a company to turn over its inventory. So, the correct formula is (Average inventory held/Cost of sales) × 365. Option A is incorrect because it only calculates the inventory turnover ratio, not the period in days. Option B is incorrect because it divides the average inventory by sales, which doesn't give any meaningful information about turnover period. Therefore, the correct answer is option C.

The Formula for the Average Inventory Turnover Period in Days