NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Financial Analysis
A company reports sales of Rs 800 crore, cost of goods sold of Rs 560 crore, and opening and closing inventory of Rs 90 crore and Rs 110 crore respectively. Using average inventory, what are the inventory days on a 365-day basis (rounded to the nearest day)?
Average inventory is Rs 100 crore and COGS is Rs 560 crore, giving turnover of 5.6 times and about 65 to 66 days of inventory. Using sales instead of COGS would give a wrong, lower figure.
- AApproximately 66 days
- BApproximately 72 daysCorrect
- CApproximately 51 days
- DApproximately 94 days
Explanation
Average inventory = (90+110)/2 = 100. Inventory turnover = 560/100 = 5.6 times. Days = 365/5.6 = 65.2, approximately 65 days. Check: 100/560 x 365 = 65.2. The closest option is 66, so the figure is about 66 days.
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