Giertsen Products presently has an accounts receivable turnover of 11 and an inventory turnover of 7. For
Question:
Giertsen Products presently has an accounts receivable turnover of 11 and an inventory turnover of 7. For each of the following transactions, specify the effect of the transaction on these two ratios. Use I for increase, D for decrease, and NC for no change.
Accounts ReceivableAccounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Tumover A/R INV A. Collection of an account receivable. B. Recording accrued but unpaid interest C. Purchase of inventory on account. D. Payment of an account payable. E. Borrowing from the bank on a short-term note. F. Purchase of temporary investments G. Payment of insurance premium of six months in advance II. Additional contributions of cash made by owners I. Purchase of equipment with a cash down payment and long-term note payable. J. Granted sales allowances to a customer
Step by Step Answer:
AR Turn Inv Turn A This will not impact sales AR inventory or CGS so it will not impact either ratio ...View the full answer
Introduction to Accounting An Integrated Approach
ISBN: 978-0078136603
6th edition
Authors: Penne Ainsworth, Dan Deines
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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