Corporate Finance

1. Your company had $10 million in sales last year. Its cost of goods sold was $7 million and its average inventory balance was $1,200,000. What were its average days of inventory?

2. Happy Valley Homecare Suppliers Inc. (HVHS) had $20 million in sales this past year. Its cost of goods sold was $8 million, and its average inventory balance was $2,000,000.

a. Calculate the average number of days inventory outstanding ratios for HVHS.

b. The average days of inventory in the industry is 73 days. By how much would HVHS reduce its investment in inventory if it could improve its inventory days to meet the industry average?

Solution:

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