how do you calculate days-in inventory ratio?

Accounting Aug 10, 2020

Expert Solution

The days sales inventory is calculated by dividing the ending inventory by the cost of goods sold for the period and multiplying it by number of days in a year.

Formula;

Day's sales inventory ratio= (Ending inventory/ Cost of goods sold)* 365

Days in inventory ratio usually focuses on ending inventory whereas inventory turnover ratio focuses on average inventory.

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