Caterpillar’s December 31st, 1998 balance sheet shows accounts receivable of approximately $2.5 billion, accounts payable of approximately $4.0 billion, and an inventory of approximately $3.0 billion. Their 1998 income statement shows Cost of Good Sold (COGS) of approximately $15 billion, sales of approximately $20 billion, and operating costs of approximately $18 billion. How many days, on average, does Caterpillar hold its inventory? Assume a year has 360 days.

the Average Number of inventory days is 72 days

Explanation:

The computation of the no of days is given below:

We know that

Inventory Turnover Ratio

= Cost of Goods Sold ÷  Average Inventory

= 15 ÷ 3

= 5

Now the Average Number of inventory days is

= 360 ÷ 5

= 72 days

hence, the Average Number of inventory days is 72 days

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