New Home reported the following income statement for the year ended December 31, 2017: Requirements 1. Compute
Question:
Requirements
1. Compute New Home€™s inventory turnover rate for the year.
2. Compute New Home€™s days€™ sales in inventory for the year.
NEW HOME Income Statement Year Ended December 31, 2017 Sales Revenue 5 120,000 Cost of Goods Sold: Beginning Merchandise Inventory Net Cost of Purchases Cost of Goods Available for Sale Less: Ending Merchandise Inventory Cost of Goods Sold 8,800 70,000 78,800 13,000 Gross Profit Operating Expenses Net Income 65,800 54,200 21,300 S32,900
Step by Step Answer:
Requirement 1 Inventory turnover is 604 times for the year Calculations Average merchandise invent...View the full answer
Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
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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