Days' Sales in Inventory

question 36

Multiple Choice

Days' sales in inventory:

• A) Is also called days' stock on hand.
• B) Focuses on average inventory rather than ending inventory.
• C) Is used to measure solvency.
• D) Is calculated by dividing cost of goods sold by ending inventory.
• E) Is a substitute for the acid-test ratio.

---

Definitions:

Accepted

Acknowledged or approved, typically in the context of an agreement or transaction.

Discount Rate

The discount rate is the interest rate used in discounted cash flow (DCF) analysis to present value future cash flows and assess the attractiveness of an investment.

Net Present Value

An approach to determining the value of an investment by discounting future cash flows to their present value.

Cash Flows

The total amount of money being transferred into and out of a business, particularly regarding calculating its operating, investing, and financing activities.