Santa Fe Communications reported the following figures in its annual financial statements: Cost of Goods Sold ..............
Question:
Santa Fe Communications reported the following figures in its annual financial statements:
Cost of Goods Sold .............. $ 18,000
Beginning Merchandise Inventory ..........500
Ending Merchandise Inventory .........425
Compute the rate of inventory turnover and days’ sales in inventory for Santa Fe Communications. (Round to two decimal places.)
Step by Step Answer:
Inventory turnover is 3892 times and days sales in inventory is 938 days Calcu...View the full answer
Horngrens Financial and Managerial Accounting
ISBN: 978-0133255584
4th 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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