The Days' Sales in Inventory Ratio Is Computed by Dividing

question 113

True/False

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

---

Definitions:

Invoice

A document issued by a seller to a buyer, detailing a transaction and requesting payment for goods supplied or services rendered.

Open Account

A credit arrangement where goods or services are sold without immediate payment, allowing the buyer to pay at a later scheduled date.

EOQ Model

The Economic Order Quantity model is used to determine the optimal order size to minimize the sum of ordering, carrying, and stockout costs.

Reorder Points

The inventory level at which a new order should be placed to replenish stock before it runs out, avoiding stockouts and production delays.