Asked by DeAndra Kelly on May 11, 2024
Verified
The formula for the average sale period is: Average sale period = Accounts receivable turnover ÷ Inventory turnover.
Average Sale Period
estimates the average time it takes for a company to sell its inventory.
Accounts Receivable Turnover
A financial metric that measures how often a company collects its receivables over a time period.
Inventory Turnover
A ratio indicating how many times a company's inventory is sold and replaced over a specific period, helping assess efficiency in managing inventory levels.
- Conduct computations and examinations of distinct financial ratios, such as total asset turnover, inventory turnover, and accounts receivable turnover.
Verified Answer
CT
Cyren ToledoMay 16, 2024
Final Answer :
False
Explanation :
The formula for the average sale period is actually: Average sale period = 365 days ÷ Accounts receivable turnover. The formula given in the statement is incorrect.
Learning Objectives
- Conduct computations and examinations of distinct financial ratios, such as total asset turnover, inventory turnover, and accounts receivable turnover.