Review the data in Exercise 5-21. Requirements 1. Compute the rate of inventory turnover for the fiscal
Question:
Requirements
1. Compute the rate of inventory turnover for the fiscal year ended March 31, 2012, assuming $22,000 in average inventory.
2. The inventory turnover rate for the fiscal year ended March 31, 2011, was 3.8 times. Did the inventory turnover rate improve or deteriorate from 2011 to 2012?
3. Calculate the gross profit percentage.
4. The gross profit percentage for the fiscal year ended March 31, 2011, was 62%. Did the gross profit percentage improve or deteriorate during the fiscal year ended March 31, 2012?
Step by Step Answer:
Req 1 Current year Last year Inventory turnover Cos...View the full answer
Financial and Managerial Accounting
ISBN: 978-0132497978
3rd Edition
Authors: Horngren, Harrison, Oliver
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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