The following financial statement data for years ending December 31 for Holland Company are shown below. a.
Question:
The following financial statement data for years ending December 31 for Holland Company are shown below.
a. Determine the inventory turnover for 2014 and 2013.
b. Determine the number of days’ sales in inventory for 2014 and 2013. Round to one decimal place.
c. Does the change in inventory turnover and the number of days’ sales in inventory from 2013 to 2014 indicate a favorable or an unfavorabletrend?
2014 2013 Cost of merchandise sold Inventories 1,452,500 $1,120,000 Beginning of year End of year 380,000 450,000 320,000 380,000
Step by Step Answer:
a b c The increase in the inventory turnover from 32 to 35 and the decrease in the number ...View the full answer
Corporate Financial Accounting
ISBN: 978-1133952411
12th 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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