DOH

CFA Level I
#1

Sales: 300000 Inventory Beg: 2000 Inventor End: 2300 COGS: 20000 Purchases: 20300 Days Inventory on Hand ratio for this company is: a) 41.97 b) 39.23 c) 36.50 d) 34.33

#2

20000/2150 = 9.3 365/9.3 = 39.25

#3

Dont you use average inventory in the denominator??

#4

I did the same, book says a) 2300*365 / 20000

#5

mutualfundsig Wrote: ------------------------------------------------------- > Dont you use average inventory in the > denominator?? Key idea to remember that if you use 1 item from the income statement and the other from the balance sheet in a ratio, you must use the AVERAGE amount from the balance sheet, not just the current one. COGS = I.S. Inventory = B.S.

#6

… i used avg inventory

#7

use average inventory.

#8

Well take a look at CFA text. Problem 2, of Reading 46. Pg 130 of vol 4.

#9

I used average, but got the wrong answer, thats why I posted.

#10

B 2 steps find inventory turns, which is COGS/avg invty step II = 365/what you got in step I