Suppose at December 31 of a recent year, the following information (in thousands) was available for sunglasses manufacturer Oakley Inc.: ending inventory $166,000; beginning inventory $120,000; cost of goods sold $351,780 and sales revenue $761,000.

A - Calculate the inventory turnover for Oakley, Inc.

B - Calculate the days in inventory for Oakley, Inc.

A-Inventory Turnover Ratio = $ 351,780 : $ 144,000 = 2.4 Times

B-Inventory Days = (144,000 : 351,780) * 365 = 149.4 Days

Explanation:

A-Inventory Turnover Ratio:

Inventory turnover ratio is calculated in order to identify number of times inventory is used or sold over a period of time:

Formula:

Inventory Turnover Ratio: Cost of Goods Sold : Average Inventory

* Average Inventory = (Opening Inventory + Closing Inventory) / 2

* * Average Inventory = ($120,000 + $166,000) : 2 = $ 144,000.

** * Inventory Turnover Ratio = $ 351,780 : $ 144,000 = 2.4 Times

B - Inventory Days:

Inventory days is an efficiency ratio that indicates the average number of days a company holds it inventory before selling it.

Formula:

Inventory Days = (Average Inventory : Cost of Goods Sold) * 365 days.

Inventory days = (144,000 : 351,780) * 365 = 149.4 Days