- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 11. Financial Analysis Techniques
- Subject 2. Activity Ratios

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**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?

B. Average inventory

C. Net sales

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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