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A company that has days sales uncollected of 30 days and days sales in inventory of...

A company that has days sales uncollected of 30 days and days sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days. true or false?

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Answer #1

Average Days sales in inventory will show us to number of days is taken for converted of stock in sales

And average days sales in inventory = 18 Days

It means for conversion from inventory to sales is 18 Days

And , Sales are uncollectable of 30 Days

So total days taken from conversion of inventory in cash = DAys sales in inventory + Sales uncollected Days

days taken from conversion of inventory in cash = 18 Days + 30 Days = 48 Days.

It means the given statement that inventory will be converted to cash in about 12 days is False.

Answer = False

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