Important calculation

Inventory t/o

Balance Sheet Line Item	Amount
Cost of goods sold	$4,075,000
Direct materials expense	$1,550,000
Raw materials inventory	$388,000
Total inventory	$815,000

To calculate total inventory turnover, the accounting staff creates the following calculation:

$4,075,000 Cost of Goods Sold
--------------------------------------   =   5 Turns Per Year
$815,000 Inventory

To determine the number of days of inventory on hand, they divide the number of turns per year into 365 days, as follows:

Cost of Goods Sold
365 /    -----------------------
Inventory

=

$4,075,000 Cost of Goods
365 / ---------------------------------
$815,000 Inventory

= 73 Days of inventory

CCC	=	# days between disbursing cash and collecting cash in connection with undertaking a discrete unit of operations.
	=	Inventory conversion period	+	Receivables conversion period	–	Payables conversion period
	=	Avg. Inventory COGS / 365	+	Avg. Accounts Receivable Credit Sales / 365	–	Avg. Accounts Payable Purchases / 365