Company made sales of $24,600 million during 2018. Cost of goods sold for the year totaled $9,840
Question:
Company made sales of $24,600 million during 2018. Cost of goods sold for the year totaled $9,840 million. At the end of 2017, Fairbanks’ inventory stood at $1,000 million, and Fairbanks ended 2018 with inventory of $1,400 million. Compute Fairbanks’ gross profit percentage and rate of inventory turnover for 2018.
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Financial Accounting
ISBN: 978-0134725987
12th edition
Authors: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
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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