Inventory
Days ratio of 3 elements of inventory can be differently calculated.
Finished goods days has a denominator (D) of -cost of sales
WIP has D of -cost of production
And raw materials have D of -cost of purchases
Are these 3 mutually exclusive or "cost of sales" includes both "cost of prod and cost of purchases"
And likewise, cost of prod includes clst of purchases.
Thanks
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Inventory days ratio
7y ago#1They are mutually exclusive. There are three types of inventories - raw materials, work-in-progress, and finished goods.
The cost of sales certainly includes the cost of purchases, but that is of no relevance - we are trying to get an idea of how long each of the inventories will last.
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