Hauser Sports had sales in 2010 of $750,000, cost of sales of $500,000, average accounts receivable of $100,000 and average inventory of $225,000. How many days, on average, does it take Hauser Sports to sell its inventory assuming that all sales are on credit?
To calculate the number of days it takes Hauser Sports to sell its inventory, we can use the formula for inventory turnover. The inventory turnover ratio is calculated by dividing the cost of sales by the average inventory.
Inventory turnover ratio = Cost of Sales / Average Inventory
In this case:
Cost of Sales = $500,000
Average Inventory = $225,000
Let's calculate the inventory turnover ratio:
Inventory turnover ratio = $500,000 / $225,000
= 2.22
Now, to calculate the number of days it takes to sell the inventory, we divide 365 (the number of days in a year) by the inventory turnover ratio:
Number of days = 365 / Inventory turnover ratio
= 365 / 2.22
≈ 164.41
Therefore, it takes Hauser Sports approximately 164.41 days, on average, to sell its inventory.