A company has closing inventory of $45,000, opening inventory of $39,000, cost of sales of $300,000 and revenue of $400,000. What are its inventory holding days based on closing inventory, to the nearest day (using a 365-day year)?

Correct answer: A) 55 days

Explanation

Inventory days = closing inventory / cost of sales x 365 = $45,000 / $300,000 x 365 = 54.75, which rounds to 55 days. Using revenue gives 41 days, and using average inventory ($42,000) gives 51 days, which is not the basis asked for. 7 is the inventory turnover in times (rounded), not days.