IAS 1 Inventory Days

Question 1

What makes good inventory days?

Answer 1

Lower the number of days

Question 2

Issue with holding inventory for long periods of time?

Answer 2

It constrains cash flow and increases risks associated with holding the inventory

Question 3

What must a business do?

Answer 3

Ensure there’s enough inventory to meet demand of its customers

Question 4

Risk if inventory is held longer?

Answer 4

Greater the risk that it could be subject to theft, damage or obsolescence

Question 5

What does inventory holding period/inventory days work out?

Answer 5

Average number of days items of inventory are held for

Question 6

A lengthening inventory days could indicate?

Answer 6

Slow down in demand/trading
A build up in inventory levels, excessive investment

Question 7

What must entity consider when holding inventory?

Answer 7

Lead times
Serasonal fluctuations
Alternative use of warehouse space
Bulk buying discounts
Likelihood of inventory obsolescence