Question

Brief Exercise 199 At December 31, 2022, the following information (in thousands) was available for Ayayai Inc.: ending inventory $22,200; beginning inventory $21,900; cost of goods sold $220,500, and sales revenue $435,000. Calculate the inventory turnover and days in inventory for Ayayai. (Round answers to 1 decimal places, e.g. 15.2. Use 365 days for calculation.)

Answer 1

Answer:

Inventory Turnover = 10.

Days in Inventory = 36.5.

Explanation:

Inventory Turnover Ratio

It is calculating by taking Cost of Goods Sold, and dividing it by Average Inventory.

whereas

Average Inventory = (Beginning Inventory + Ending Inventory) / 2

                                              Putting values:

⇒ Average Inventory = (21,900 + 22,200) / 2 = $22,050.

Now Take the value of Cost of Goods Sold and divide it by Average Inventory to get Inventory Turnover:

⇒ Inventory Turnover = 220,500 / 22,050 = 10.

Days in Inventory

Take the Average Inventory and Divide it by Cost of Goods Sold. Now Multiply the result with number of days.

⇒ Days in Inventory = (22,050 / 220,500) * (365) = 36.5.

Note: Some Analysts measure the Inventory Turnover by taking Sales and Dividing it by Average inventory.

Thanks!