Corporate Finance II online Quiz

varsha.rajpurohit
Posts: 9
Joined: Thu Sep 06, 2012 10:08 am

Corporate Finance II online Quiz

Postby varsha.rajpurohit » Thu Sep 06, 2012 10:18 am

This is regarding Q7 on the Corporate Finance Quiz II.

The Question states :


The average inventory of a manufacturing firm is $3.5 and the cost of goods sold is $24 million. Calculate the inventory turnover.
a. 6.85
b.53.22
c. 52.5

Answer given is 53.22

As per my understanding the Inventory Turnover = Cost of Goods Sold / Average Inventory
= 24 / 3.5
= 6.85
Number of days of inventory = 365 / inventory turnover
= 365 / 6.85
= 53.22
The Question here is to calculate Inventory Turnover so the correct answer should have been 6.85.
Could someone clarify this doubt.Thanks

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shreyas
Finance Junkie
Posts: 83
Joined: Thu Jul 19, 2012 6:49 pm

Re: Corporate Finance II online Quiz

Postby shreyas » Mon Sep 10, 2012 4:43 pm

The solution actually calculated for more than asked, but helped you in understanding the concept. You are correct, it actually asked for inventory turnover ratio so the answer should be 6.85 and not 53.22 :)

varsha.rajpurohit
Posts: 9
Joined: Thu Sep 06, 2012 10:08 am

Re: Corporate Finance II online Quiz

Postby varsha.rajpurohit » Tue Sep 11, 2012 7:52 pm

Yeah 1 right .....thanks Shreyas


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