The following data were extracted from the income statement of Keever Inc.: a. Determine for each year
Question:
a. Determine for each year
(1) The inventory turnover and
(2) The number of days sales in inventory. Round to the nearest dollar and one decimal place.
b. What conclusions can be drawn from these data concerning the inventories?
Previous Year Current Year Sales $18,500,000 $20,000,000 860,000 10,800,000 940,000 Beginning inventorles Cost of goods sold Ending inventories 940,000 9,270,000 1,120,000
Step by Step Answer:
a 1 2 Average daily cost of goods sold 25397 9270000 ...View the full answer
Corporate Financial Accounting
ISBN: 9781337398169
15th Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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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