Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

The measure of how long a company holds inventory before selling it is called the:

Accounts receivable turnover

Gross profit margin

Days sales of inventory (DSI)

Inventory turnover ratio

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Verified step by step guidance

Understand the concept: Days Sales of Inventory (DSI) measures the average number of days a company takes to sell its inventory during a specific period. It is a key metric for assessing inventory management efficiency.

Identify the formula for DSI: The formula is \( \text{DSI} = \frac{\text{Average Inventory}}{\text{Cost of Goods Sold (COGS)}} \times 365 \). This formula calculates the number of days inventory is held before being sold.

Break down the components: Average Inventory is typically calculated as \( \frac{\text{Beginning Inventory} + \text{Ending Inventory}}{2} \). COGS is found on the income statement and represents the direct costs of producing goods sold by the company.

Understand the relationship: A lower DSI indicates faster inventory turnover, meaning the company sells its inventory more quickly. Conversely, a higher DSI suggests slower turnover, which could indicate inefficiencies or overstocking.

Apply the formula: To calculate DSI, plug the values for Average Inventory and COGS into the formula and multiply by 365. This will give the average number of days inventory is held before being sold.