The following data were extracted from the income statement of Clear View Systems Inc.: a. Determine for
Question:
The following data were extracted from the income statement of Clear View Systems Inc.:
a. Determine for each year
(1) The inventory turnover and
(2) The number of days' sales in inventory. Round to nearest dollar and one decimal place.
b. What conclusions can be drawn from these data concerning theinventories?
Current Year Preceding Year Sales Beginning inventories Cost of goods sold Ending inventories $756,000 67,200 492,000 64,000 $950,760 44,000 528,200 67,200
Step by Step Answer:
a 1 2 b The inventory position of the business has deteriorated The inventory turnover h...View the full answer
Accounting
ISBN: 978-0324401844
22nd Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan E. 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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