CA Intermediate · Financial Management and Strategic Management · Management of Inventory
A firm's annual cost of goods sold is Rs 36,00,000 and its average inventory is Rs 6,00,000. Taking a 360-day year, what is the inventory holding period?
The holding period is 60 days. Inventory turnover is cost of goods sold divided by average inventory, which is 6 times a year. Dividing 360 days by 6 gives 60 days of average stock holding.
- A30 days
- B60 daysCorrect
- C6 days
- D90 days
Explanation
Inventory turnover = 36,00,000 / 6,00,000 = 6 times. Holding period = 360 / 6 = 60 days. Using 12 as the divisor wrongly gives 30 days.
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