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Calculate and explain inventory turnover, accounts receivable turnover

- How is inventory turnover calculated?

- Explain how inventory turnover affects the amount of cash that must be invested in inventory.

- How is accounts receivable turnover calculated?

- Explain how accounts receivable turnover affects the amount of cash that must be invested in accounts receivable.

- Assuming that a company has $365 million in annual sales, and a gross margin of 20%, how much investment will each additional day of sales in inventory require?

- Assuming that a company has $365 million in annual sales, and a gross margin of 20%, how much investment will each additional day of sales in accounts receivable require?

Solution Preview

Inventory turnover:

cost of goods sold
average inventory

Accounts receivable ...

Solution Summary

Your tutorial is in Excel (attached). Click in cells to see computations. One day's investment in inventory and AR are computed for you and discussion walks you through it.

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