Tis question is Accountin 2

Accounting
Tutor: None Selected Time limit: 1 Day

A company has sales of $5,737,000, a gross profit ratio of 35%, ending merchandise inventory of $361,425, and total current assets of $5,539,600. What is the days sales' in inventory ratio for the year?

Aug 24th, 2015

Hi there! Thank you for the opportunity to help you with your question!

First, we need to get the Cost of Goods Sold (COGS). This is done from the information that the gross profit ratio is 35%. We have that:

0.35 = (sales - COGS)/sales. The sales was 5,737,000, which gives COGS =3,729,050.

The inventory ratio is COGS/inventory = 3,729,050/361,425 = 10.3176

Now days sales' inventory is given by (1/10.3176 ) * 365 days = 35.37 days

Please let me know if you need any clarification. Always glad to help!
Aug 24th, 2015

Thank you

Aug 24th, 2015

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