An investor is comparing the Days Inventory on Hand (DOH) for two different mass

Question

An investor is comparing the Days Inventory on Hand (DOH) for two different mass market stores. What information does the DOH tell him?

Select one:

a. DOH is a measure of how much the firm earns for each unit of sales; i.e. customers pay higher prices to get the products they want quickly.

b. The DOH is a measure of how much the firm has to pay for its goods; i.e. reducing transportation costs or better prices from the suppliers.

c. A high DOH is an indication that the firm is meeting demand and has little risk of inventory obsolescence and markdowns.

d. The DOH is a measure of supply chain efficiency and can have a tremendous impact on the bottom line as a low DOH means that cash is not tied up in inventory.

e. None of the given statements are true.

Explanation / Answer

answer is c. A high DOH is an indication that the firm is meeting demand and has little risk of inventory obsolescence and markdowns.

reason-DOH measures the amount of inventory in the units of days of sale for e.g. if 3 goods are sold and 40 goods are inventory then DOH= 40/3

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