From the given income statement and additional information of Cunningham Co., compute the following: a. Asset turnover
Question:
From the given income statement and additional information of Cunningham Co., compute the following:
a. Asset turnover for 2016
b. Inventory turnover for 2016
c. Accounts receivable turnover for 2016
Asset TurnoverAsset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
Net Sales Cost of Goods Sold Gross Profit Operating Expenses (includes taxes) Net Income 2016 $820,000 712,000 $108,000 2015 $700,000 504,000 $196,000 169,000 27,000 2015 75,000 2016 64,000 93,000 25,000 64,000 Year-End Accounts Receivable Year-End Inventory All sales were on credit Total Assets 280,000 165,000
Step by Step Answer:
a b c Net sal...View the full answer
College Accounting A Practical Approach Chapters 1-25
ISBN: 9780133791006
13th Edition
Authors: Jeffrey Slater
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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