Assuming a 365-day year, the number of days required for Carl Equipment to convert its average inventory into cash is:
A) 36.5.
B) 73.0.
C) 24.3.
D) 304.2.

Question

Quizplus · Accepted Answer

Carl Equipment's average inventory is $1,200,000 and its cost of goods sold is $4,800,000. So, its inventory turnover ratio is 4,800,000 / 1,200,000 = 4. This means that Carl Equipment converts its average inventory into cash 4 times per year. So, the number of days required for Carl Equipment to convert its average inventory into cash is 365 days / 4 = 36.5 days.

Assuming a 365-Day Year, the Number of Days Required for Carl