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Binny Co has annual sales of $960,000 abd a current ratio of 3.2:1 . All of its sales are for cash and are priced at a mark up on cost of 50% . The average cash balance is $40000 and the inventory turnover period is 90 days.
Assuming 360 days in a yaer, what is Binny Co’s quick ratio?
Answer : 0.64
My approach to get the answer was the same as BPP but the difference was the formula used for inventory turnover period, the OT notes as well as according to my knowledge the formula is Cost of sales/Inventory. But what’s used in the answer in the revision kit is Inventory/COS *365. Is there any mistake or is inventory days same as inventory turnover period?
Sorry for this silly doubt and thank you!
The inventory turnover period and inventory days are indeed the same concept.
So, there is no mistake in the revision kit; both terms refer to the same calculation.
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