During 2011, Chico Clothiers had beginning inventory of $480,000, ending inventory of $560,000, and cost of goods
Question:
During 2011, Chico Clothiers had beginning inventory of $480,000, ending inventory of $560,000, and cost of goods sold of $2,200,000. Compute the inventory turnover and days’ inventory on hand.
Ending InventoryThe ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
Inventory Turnover Days Inventory on Ha...View the full answer
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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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