The following data are from the income statements of Haskin Company. (a) Calculate for each year (1)
Question:
(a) Calculate for each year (1) the inventory turnover and (2) the days sales in inventory.
(b) What conclusions concerning the management of the inventory can be drawn?
2016 $6,240,000 860,000 4,661,000 940,000 2017 Sales revenue Beginning inventory Purchases Ending inventory $6,420,000 940,000 4,340,000 1,020,000
Step by Step Answer:
a 2017 2016 Beginning Inventory 940000 860000 Purchases 4340000 4661000 Ending Inventory 102...View the full answer
Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
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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