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Ratio Analysis — Accountancy STD 12 — Question

Tamilnadu BoardEnglish MediumSTD 12AccountancyRatio Analysis2 Marks
Question
What is the inventory conversion period? How is it calculated?
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Answer

The inventory conversion period is the time taken to sell the inventory.
A shorter inventory conversion period indicates more efficiency in the management of inventory. It is computed as follows:
$\text { Inventory conversion period (in days) }=\frac{\text { Number of days in a year }}{\text { Inventory turnover ratio }}$
$\text { Inventory conversion period (in months) }=\frac{\text { Number of months in a year }}{\text { Inventory turnover ratio }}$

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