COGS = 30,000 Beginning Inv = 1,500 Ending Inv = $ 2,000 Calculate No. of days inventory. No. of days inventory =365 / ( COGS/Avg. inv) = 30,000/(1750) I’m not sure why CFAI calculates them using the ending Inv No. of days inventory =365 / ( COGS/ENDING inv) Does anyone know?
It should be average inventory. (CFA’s FSA Book, page 584)
just use balance-sheet averaging when combining ratios with income statement figures
Try looking at Book 4 Reading 46, question 2 and 3. the solutions are not using the average numbers at all.
Chicago Bull, I noticed this too. I would go with average inventory…
yea…blaardy h3l1 CFAI materials are going against themselves…
Use the average if you want to know on average how much inventory is on hand over the year, use the ending balance if you want to know how many days of inventory on hand you have at the end of the year. That’s the only rule. Agreed, problems 2, 3 are not clear as to what is required (average over the year or year end).
If they are asking to calculate No. Days Inventory at the end of the year use Year-End Inventory. If calculating average No. Days Inventory then use average Inventory Turnover… At least that is my guess.