For each ratio listed, identify whether the change in ratio value from 2010 to 2011 is usually
Question:
Ratio 2011 2010 Ratlo 2011 2010 . Profit margin 2. Debt ratio 3. Gross margin 4. Acid-test ratio 10% 9% 5, Accounts receivable turnover 43% 39% 6. Basic earnings per share 32% 44% 7. Inventory turnover 1.20 05 8. Dividend yield 6.7 5.5 $1.25 $1.10 3.4 3.6 4% 3.2%
Step by Step Answer:
Ratio 2011 2010 Change 1 Profit Margin Ratio 10 9 Favorable 2 Debt ...View the full answer
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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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