Financial statement data for years ending December 31 for Amsterdam Company follow: a. Determine the inventory turnover
Question:
Financial statement data for years ending December 31 for Amsterdam Company follow:
a. Determine the inventory turnover for 20Y4 and 20Y3.
b. Determine the days’ sales in inventory for 20Y4 and 20Y3. Use 365 days and round to one decimal place.
c. Does the change in inventory turnover and the days’ sales in inventory from 20Y3 to 20Y4 indicate a favorable or an unfavorable trend?
20Υ4 20Υ3 Cost of merchandise sold $3,598,900 $3,015,630 Inventories: 593,000 589,600 Beginning of year End of year 648,000 593,000
Step by Step Answer:
ANSWER To solve this problem we need to calculate the inventory ...View the full answer
Accounting
ISBN: 9781337902687
28th Edition
Authors: Carl S. Warren, Christine Jonick, Jennifer Schneider
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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