Question: When calculating days inventory, the average inventory level is compared with the cost of sales. When calculating days debtors, the average accounts receivable balance is

When calculating days inventory, the average inventory level is compared with the cost of sales. When calculating days debtors, the average accounts receivable balance is compared with the sales revenue. Explain why the former ratio uses cost of sales whereas the latter uses sales revenue.

Step by Step Solution

3.24 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

The purpose of ratio analysis is to express a relationship between two relevant items that is easy t... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

862-B-A-G-F-A (8482).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!