Days' sales in inventory:
A)Shows the buffer against out-of-stock inventory.
B)Focuses on average inventory rather than ending inventory.
C)Is used to measure solvency.
D)Is calculated by dividing cost of goods sold by ending inventory.
E)Is a substitute for the acid-test ratio.

Question

Quizplus · Accepted Answer

Days' sales in inventory measures how many days a company's current inventory will last based on the average daily cost of goods sold. It is used to monitor and manage inventory levels and can help prevent stock shortages.

Days' Sales in Inventory