Calculate inventory and settlement-period ratios
Calculate inventory turnover, inventory days, trade receivable days and trade payable days with the syllabus formulae.
Cambridge IGCSE Accounting 0452 / (9–1) 0985, 2027–2029 Version 1. These lessons follow the 2027–2029 syllabus only; the separate 2026 syllabus update is not yet mapped. Written practice is self-checked, not an official Cambridge grade. Full timed-paper practice and human subject-teacher review remain pending.
Before you begin
- No previous accounting study is assumed. Keep the business, transaction and accounting period in view, and distinguish a resource, a claim and a performance result.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Cost of sales is $48,000 and average inventory $8,000. How many times is inventory turned over?
What you will learn
- Calculate inventory turnover in times and days
- Calculate trade receivables turnover in days
- Calculate trade payables turnover in days
Use the four efficiency formulae
Rate of inventory turnover (times) = cost of sales ÷ average inventory. Inventory turnover (days) = average inventory ÷ cost of sales × 365 days.
Trade receivables turnover (days) = trade receivables ÷ credit sales × 365 days. Trade payables turnover (days) = trade payables ÷ credit purchases × 365 days.
Keep the base and unit consistent
Use average inventory for both inventory formulae. Use credit sales and credit purchases, not total revenue or all purchases, for the debtor and creditor periods.
A day figure is an estimate based on balances and annual activity; show the calculation and round only at the end as instructed.
Pause and explain
Trade payables are $6,000 and credit purchases are $36,500. Calculate the payables period.
Worked example
Cost of sales is $90,000 and average inventory $15,000. Trade receivables are $12,000, credit sales $73,000; trade payables are $9,000 and credit purchases $54,000. Calculate inventory turnover in times and days, receivables days and payables days.
Show the worked solution
- Inventory turns = 90,000 ÷ 15,000 = 6 times; inventory days = 15,000 ÷ 90,000 × 365 = 60.8 days.
- Receivables days = 12,000 ÷ 73,000 × 365 = 60 days to the nearest day.
- Payables days = 9,000 ÷ 54,000 × 365 = 60.8 days.
Answer Inventory turnover 6 times or 60.8 days; receivables about 60 days; payables about 60.8 days.
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Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Cost of sales is $120,000; opening inventory $22,000 and closing inventory $18,000. Calculate average inventory, turnover in times and turnover in days.
Give me a hint
Average the two inventory balances before applying the syllabus formulae.
Compare my reasoning
- Average inventory = (22,000 + 18,000) ÷ 2 = $20,000.
- Turnover = 120,000 ÷ 20,000 = 6 times.
- Days = 20,000 ÷ 120,000 × 365 = 60.8 days.
Average inventory $20,000; inventory turnover 6 times or 60.8 days.
Look for these in your work
- Average correct
- Times correct
- Days correct
Trade receivables are $15,000 and credit sales $91,250. Calculate the receivables turnover period.
Give me a hint
Divide the receivables balance by credit sales and multiply by 365 days.
Compare my reasoning
- Ratio = 15,000 ÷ 91,250 × 365.
- Receivables days = 60.
- The result is an estimated collection period in days.
Trade receivables turnover is 60 days.
Look for these in your work
- Credit sales used
- Calculation correct
- Unit identified
Trade payables are $8,400 and credit purchases $73,000. Calculate payables days. Explain one reason to compare it with the supplier terms.
Give me a hint
Use the payables-to-credit-purchases formula and interpret it in context.
Compare my reasoning
- Payables days = 8,400 ÷ 73,000 × 365 = 42 days.
- Compare 42 days with the agreed credit terms.
- A difference may reflect policy, cash constraints or timing, so the ratio alone does not prove late payment.
Payables turnover is 42 days. Compare it with supplier terms; the ratio alone does not identify the cause or prove a breach.
Look for these in your work
- Days calculation correct
- Terms comparison relevant
- Cause qualified
Common mistakes
- Using closing rather than average inventory when average is supplied
- Using total sales instead of credit sales for receivables days
- Using cost of sales instead of credit purchases for payables days
- Reporting a days formula as a ratio in times
What can you explain now?
Which sales figure is used for trade receivables days?
Compare with the explanation
Credit sales
The calculation relates receivables from credit customers to credit sales.
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Make it stick
Why should you use credit purchases rather than total purchases for payables days?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.