How is the inventory turnover computed? Why is this measurement of interest to short-term creditors?
Question:
Step by Step Answer:
The inventory turnover is computed by dividing the cost of goods sold by the average amount of inv...View the full answer
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
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.
Students also viewed these Managerial Accounting questions
-
a. How is the inventory turnover computed? b. What precautions are necessary in arriving at the inventory number to be used in the turnover calculation? c. How would you interpret a rising inventory...
-
What is the inventory turnover for Genuine Reproductions from Problems 3 and 4 if sales actually increase 20 percent but the average inventory rises to $325,000?
-
How is inventory shrinkage computed under a perpetual inventory system?
-
Laura Leasing SA signs an agreement on January 1, 2022, to lease equipment to Plote AG. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no...
-
Describe the end behavior of each function in Problem. f(x) = 2x-3
-
During audit of accounts of G. Company, your assistant found errors in the calculation of the wages of factory workers and he wants you to verify his work. He has extracted the following information:...
-
Predicting Delayed Flights. The file FlightDelays . jmp contains information on all commercial flights departing the Washington, DC area and arriving at New York during January 2004. For each flight...
-
Data Performance, a computer software consulting company, has three major functional areas: computer programming, information systems consulting, and software training. Carol Bingham, a pricing...
-
Constructing Balance Sheets and Determining Income Following is balance sheet information for Lynch Services at the end of Year 2 (the most recent year) and Year 1. December 31,Year 2 December...
-
I. Do you think treating employees in Tasty Meal is unfair? Justify. Keep the unemployment factor, poverty and economical environment in mind. II. Should Tasty Meal be accused for health issues by...
-
Briefly explain the gross profit method of estimating inventories. In what types of situations is this technique likely to be useful?
-
Baxter Corporation has been using FIFO during a period of rising costs. Explain whether you would expect each of the following measurements to be higher or lower if the company had been using LIFO....
-
Peggy Hamilton was a major shareholder in Carbon Processing and Reclamation (CPR), LLC. After a dispute, she sold her interest in the company and signed a confidentiality agreement not to divulge...
-
Bond valuation An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $3,000, and has a yield to maturity of 8.7%. Bond C pays a 14% annual...
-
Please provide at least two examples of why you believe family law is (or is not) fair.?
-
A standard die (plural is dice) is a cube with six sides numbered one through six. Each side has an equal chance of coming up. There are many games of chance that use one or more dice to generate...
-
Explain with examples the role of non-government organisations and the media in relation to family law in Australia?
-
On January 2, SHB Company receives a 3-year, $10,000, noninterest bearing note, the present value of which is $7,722. The rate implicit on this transaction is 9%. You are completing SHB's note...
-
Find the derivative using logarithmic differentiation as in Example 7. Example 7 y = (x 3 + 1)(x 4 + 2)(x 5 + 3) 2 Find the derivative of f(x) = (x + 1)(2x-3) x +1
-
Compile data on consumption and expenditures for the following categories in 30 different countries: (1) food and beverages, (2) clothing and footwear, (3) housing and home operations, (4) household...
-
Which of the following is/are normally treated as a contingent liability? (i) The corporation tax liability for the reporting period (ii) Claim for damages by a customer, where the reporting company...
-
How can operating at 100 percent of capacity create unfavorable variances?
-
Why is it important to consider the relationships among cost, quality, and selling prices when establishing standards for direct materials?
-
Why is it important to consider the relationships among cost, quality, and selling prices when establishing standards for direct materials?
-
Paddington Gifts made purchases of a particular product in the current year as follows: Jan. 1 Beginning inventory Mar. 7 Purchased July 28 Purchased Oct. 3 Purchased Totals Required: 200 units @...
-
what cognitive alchemy does the visionary transmute the leaden constraints of the present into the gilded opportunities of tomorrow, orchestrating symphonies of innovation amidst the cacophony of...
-
a) Propose the most appropriate type of leadership that the Coca Cola Company's top management should rely on to execute the strategy, based on the type of organizational culture and strategy. b)...
Study smarter with the SolutionInn App