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The Rigby Supplement Company showed the following data in its financial statements.
2008
2007
Cost of goods sold
$1,400,000
$1,125,000
Beginning inventory
275,000
175,000
Ending inventory
405,000
1. Compute the number of days' sales in average inventory for both 2007 and 2008. What can you infer from these numbers?
2. How would you interpret the answer to (1) if this company were in the business of selling fresh fruits and vegetables? What if the company sold real estate?
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