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Answer :
The answer is c. Company B.
Based on the given information, we can determine the most efficient and effective company in managing its inventory by comparing their days' sales in inventory.
Days' sales in inventory is a financial ratio that measures how long it takes for a company to sell its inventory. It is calculated by dividing the average inventory by the cost of goods sold and then multiplying the result by 365.
Let's calculate the days' sales in inventory for each company:
a. Company A: 47.2 days' sales in inventory
b. Company B: 36.5 days' sales in inventory
c. Company C: 45.1 days' sales in inventory
d. Company D: 39.4 days' sales in inventory
The lower the number of days' sales in inventory, the more efficient and effective a company is in managing its inventory.
Comparing the values, we can see that Company B has the lowest days' sales in inventory with 36.5 days. This means that Company B takes the shortest time to sell its inventory compared to the other companies. Therefore, the most efficient and effective company in managing its inventory is Company B.
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Final answer:
Company B, with 36.5 days' sales in inventory, is the most efficient at managing its inventory among the mentioned companies.
Explanation:
When comparing the days' sales in inventory of four companies, the company with the lowest number of days is often considered the most efficient and effective in managing its inventory. In this case, Company B, with 36.5 days, is the most efficient at inventory management compared to Company A (47.2), Company C (45.1), and Company D (39.4). This means that Company B is able to turn over its inventory faster than the other companies, potentially leading to better liquidity and retention of value.
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