A company reported the following data: ?Year 1Year 2Cost of goods sold$425,000$486,000Ending inventory140,000175,000Required:1. Calculate the days' sales in inventory for each year.2. Comment on the trend in inventory management.
What will be an ideal response?
1. Year 1 ($140,000/$425,000) * 365 = 120 days
Year 2 (175,000/$486,000) * 365 = 131 days
2. The company has a trend of increasing the number of days it takes to sell its inventory. This is a negative reflection on inventory management.
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What will be an ideal response?
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