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Inventory turnover = 10 times per year
->
Inventory turnover = COS / Avg. Inventory
Then how inventory turnover will be 36.5 days ; i am confused sir.The inventory turnover is not 36.5 days – it is 10 times a year!
It means that there is enough inventory to last for 1/10 of a year, which is 1/10 x 365 = 36.5 days.
If you prefer just learning formulae (which is terribly dangerous because the examiner deliberately asks questions to check you understand and have not just learned a rule), then inventory days = (average inventory / cost of sales) x 365 days.
If (cost of sales / average inventory) = 10; then (average inventory / cost of sales) = 1/10.
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