CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

To compute the days to sell the average inventory, the numerator is 365 days and the denominator is which of the following?

A. Inventory turnover rate
B. Average inventory
C. Net sales
Correct Answer: A

Days to sell the average inventory = 365/Inventory turnover rate. Inventory turnover rate = Cost of goods sold/Average inventory. The ratio of the days to sell the average inventory indicates (in days) how quickly inventory converts to cash.

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