Question

Danube reported the following amounts in its financial statements (in millions): 2015 2014 Net Sales $ 80,000 $ 67,000 Cost of Goods Sold 65,000 52,000 Beginning Inventory 6,000 4,300 Ending Inventory 7,800 6,000 Required: Determine the inventory turnover ratio and average days to sell inventory for 2015 and 2014. (Use 365 days in a year. Round your intermediate and final answers to 1 decimal place.)

Answer 1

Answer:

2014:

Inventory TO 10.10

Days outstanding: 36

2015:

Inventory TO 9.42

Days on Inventory 39

Explanation:

2014:

$\frac{Sales}{Average Inventory} = Inventory Turnover$

​where:

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

COGS      52,000

beginning: 4,300

ending:     6,000

$Average Inventory=4300 + 6000)/2$

Average Inventory   5, 150

$\frac{52,000}{5,150} = Inventory Turnover$

Inventory TO 10.09708738

$\frac{365}{Inventory TO} = Days on Inventory$

$\frac{365}{10.0970873786408} = Days on Inventory$

Days on Inventory 36

2015:

COGS:      65,000

beginning:  6,000

ending:       7,800

$Average Inventory=6000 + 7800)/2$

Inventory 6900

$\frac{65000}{6900} = Inventory Turnover$

Inventory TO 9.420289855

$\frac{365}{Inventory TO} = Days on Inventory$

$\frac{365}{9.42028985507246} = Days on Inventory$

Days on Inventory 39