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NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Financial Analysis

A company's inventory was ₹120 crore at the start and ₹180 crore at the end of the year. Cost of goods sold was ₹900 crore. Using average inventory and a 365-day year, what is the approximate number of days inventory held?

Days inventory held is about 61 days. Average inventory is 150 crore, so turnover on cost of goods sold of 900 crore is 6 times a year. Dividing 365 days by 6 gives roughly 61 days.

  1. A61 daysCorrect
  2. B55 days
  3. C41 days
  4. D81 days

Explanation

Average inventory = (120+180)/2 = 150. Inventory turnover = 900/150 = 6 times. Days = 365/6 = 60.8, about 61 days. Using closing inventory gives 180/900 x 365 = 73 days, and using opening inventory gives 49 days, both wrong.

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