A company would like to benchmark its inventory levels against other companies. Which of the following metrics is best to use for this purpose?
A company would like to benchmark its inventory levels against other companies. Which of the following metrics is best to use for this purpose?
Days of supply is the best metric for benchmarking a company's inventory levels against other companies. This metric measures how many days a company's inventory would last based on its average daily usage or sales, providing a clear comparison of inventory efficiency across different firms. It offers a straightforward way to understand and compare inventory management practices.
Answer should be days of supply - B
CCC has days inventory outstanding, days sales and payables outstanding values in its formulae. A breakup of all this if available can be a good metric as it can talk of various parameters connected to the inventory position, negotiating power with the supplier/ distributors etc.
Days of supply measures how many days a company's inventory would last based on its average daily usage or sales.