Question

Advanced Micro Devices reported sales of $205 million, accounts receivable of $15 million, cash and marketable...

Advanced Micro Devices reported sales of $205 million, accounts receivable of $15 million, cash and marketable securities of $5 million, and inventory of $25 million. Calculate the inventory turnover and days sales of inventory for Advanced Micro Devices. If the industry average for days sales in inventory is 65 days, what might this suggest about the inventory management for Advanced Micro Devices?

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Answer #1

Inventory Turnover

Inventory Turnover = Net Sales / Inventory

= $205 million / $25 million

= 8.2 times

Days sales of Inventory

Days sales of Inventory = 365 Days / Inventory Turnover

= 365 Days / 8.2

= 45 Days [Rounded to whole number]

- Days sales in Inventory measures the average number of days inventory stcok is held by the enterprises

- Or it could also be defined as the number of days taken by the company or an enterprises to sell their Merchandise inventory since it’s purchase date

- In this case, the days sales in inventory is 45 Days which is less than the Industry average of 65 days.

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