Refer to the note related to inventories in CVS Corporations annual report in the Supplement to Chapter
Question:
Refer to the note related to inventories in CVS Corporations annual report in the Supplement to Chapter 5 to answer the following questions: What inventory method(s) does CVS use? If LIFO inventories had been valued at FIFO, why would these be no difference? Do you think many of the company’s inventories are valued at market? Few companies use the retail method, so why do you think CVS uses it? Compute and compare the inventory turnover and days inventory on hand for CVS for 2008 and 2007. Ending 2006 inventories were $7,560.2 million.
Step by Step Answer:
CVS uses the lowerofFIFOcostormarket rule as determined by the retail inventory method When there ar...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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