Big Sale Stores is assessing its levels of inventory for 2013 and 2014 and has gathered the
Question:
Compute the inventory turnover and days inventory on hand for 2013 and 2014 (round to one decimal place), and comment on theresults.
2014 2013 2012 Ending inventory $192,000 162,000 $138,000 Cost of goods sold60,000 900,000
Step by Step Answer:
Inventory Turnover Cost of Goods Sold Average Inventory 20...View the full answer
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson
Related Video
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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