Compute Westtown Companys (A) inventory turnover ratio and (B) number of days sales in inventory ratio, using
Question:
Compute Westtown Company’s (A) inventory turnover ratio and (B) number of days’ sales in inventory ratio, using the following information.
Cost of goods sold Beginning inventory Ending inventory $156,000 14,500 17,500
Step by Step Answer:
Inventory turnover ratio cost of goods soldaverage inventory average i...View the full answer
Principles Of Accounting Volume 1 Financial Accounting
ISBN: 9781593995942
1st Edition
Authors: Mitchell Franklin, Patty Graybeal, Dixon Cooper, OpenStax
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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