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The following data were taken from the income statements of Mydorf Company. Compute for each year (a)

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The following data were taken from the income statements of Mydorf Company. 

2022 2022 2021 Sales revenue Beginning inventory Purchases Ending inventory $6,420,000 $6,240,000 4,840,000 1,020,000 4,


Compute for each year (a) the inventory turnover and (b) days in inventory. What conclusions concerning the management of the inventory can be drawn from these data?

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2022 2022 2021 Sales revenue Beginning inventory Purchases Ending inventory $6,420,000 $6,240,000 4,840,000 1,020,000 4,661,000 960,000

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a Inv turnover CGS Ave inv 2022 48 times 960000 4840000 1020000 9...View the full answer


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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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