Number of days of inventory

CFA Level I
#1

CFAI Book calculates “number of days of inventory” by using ending balance inventory. (Volume:4 P:130, Q 2&3) Should we not use average inventory? The formulas I use are : Number of days of inventory=365/Inventory turnover Inv turnover=COGS/Ave. Inventory

#2

you should use average inventory unless specifically told otherwise in the problem

#3

maratikus Wrote: ------------------------------------------------------- > you should use average inventory unless > specifically told otherwise in the problem Maratikus, If i make a inventory turnover comparison for period of 5 years and there is no problem with inventory in the first 4 years but year 5. So, it is obviously necessary to use avg. inventory for year 5. But why don’t we use avg. inventory for any cases from the beginning if avg. inventory reflect better calculation? Are there any trouble in practice or any other difference among methods? Thanks!

#4

Yes you always use average figures unless you don’t have complete data, or for exam you are told to do so.