Dell Inc. is the leading manufacturer of personal computers. In a recent year, it reported the following
Question:
Dell Inc. is the leading manufacturer of personal computers. In a recent year, it reported the following in millions of dollars:
Required:
1. Determine the inventory turnover ratio and average days to sell inventory for the current year.
2. Explain the meaning of each number.
Net sales revenue Cost of sales Beginning inventory Ending inventory $78,660 58,606 2,538 2,678
Step by Step Answer:
Req 1 Req 2 The inventory turnover ratio reflects how many ...View the full answer
Financial Accounting
ISBN: 9781264229734
11th Edition
Authors: Robert Libby, Patricia Libby, Frank Hodge
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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