Days' Sales in Inventory

question 44

Multiple Choice

Days' sales in inventory:

• A)Is calculated by dividing cost of goods sold by ending inventory.
• B)Focuses on average inventory rather than ending inventory.
• C)Is used to measure solvency.
• D)Measures the adequacy of inventory to meet sales demand.
• E)Is a substitute for the acid-test ratio.

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Definitions:

Incurred During

Refers to costs or expenses that happen within a specific time period.

Adjusting Entry

An accounting journal entry made at the end of an accounting period to allocate revenue and expenses to the correct periods.

Cash

Money in the form of coins or banknotes, especially that issued by a government.

Adjusting Entries

Journal records created during the final part of an accounting period for the purpose of attributing revenues and expenses to the timeframe in which they actually took place.