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3M Co. reports beginning raw materials inventory of $902 million and ending raw materials inventory of $855

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3M Co. reports beginning raw materials inventory of $902 million and ending raw materials inventory of $855 million. Assume 3M purchased $3,646 million of raw materials and used $3,692 million of raw materials during the year. Compute raw materials inventory turnover and the number of days' sales in raw materials inventory.
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in millions Cost of raw materials used 3692 Beginning raw material...View the full answer


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Fundamental Accounting Principles

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Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.

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