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

Question

Quizplus · Accepted Answer

Days' sales in inventory measures the number of days a company's inventory is held before being sold. It is calculated by dividing the ending inventory by the cost of goods sold per day. This measure helps assess the adequacy of inventory levels to meet sales demand.

Days' Sales in Inventory