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days' sales in inventory: multiple choice is calculated by dividing cost of goods sold by ending inventory. is a substitute for the acid-test ratio. shows the buffer against out-of-stock inventory. is used to measure solvency. focuses on average inventory rather than ending inventory.

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ANKITANAND

Days' sales in inventory - Shows the buffer against out-of-stock inventory.

What is inventory?
Both the raw materials in use in production and the finished goods that are offered for sale are included in the definition of inventory. One of a company's most valuable assets is its inventory because it is one of the main sources of revenue generation and, consequently, a source of profits for the company's shareholders. There are three different types of inventory: finished goods, work-in-progress, and raw materials. On the balance sheet of a company, it is listed as a current asset. Inventory is a crucial asset for any business. It is described as the assortment of raw materials or finished products that a company maintains throughout the normal course of business.

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