Westpark Video, Inc., declared bankruptcy. The company reported these figures: Requirement 1. Evaluate the trend of Westpark
Question:
Westpark Video, Inc., declared bankruptcy. The company reported these figures:
Requirement
1. Evaluate the trend of Westpark Video’s results of operations during 2016 through 2018. Consider the trends of sales, gross profit, and net income. Track the gross profit percentage and the rate of inventory turnover in each year. Also discuss the role that selling expenses must have played in the company’s recent history.
A1 Westpark Video, Inc. Statements of Income Years Ended December 31 1 2 Millions 3 Sales 4 Cost of sales 5 Selling expenses 6 Other expenses 7 Net income (net loss) 8 Additional data: Ending inventory 2017 35.2 $ 27.5 6.4 0.9 0.4 $ 2018 36.2 $ 28.7 2016 2015 34.3 26.7 8.1 0.1 5.6 0.7 (0.7) $ 1.3 7.6 $ 7.0 $ 8.0 $ 9. 6.4 10
Step by Step Answer:
Sales increased the gross profit increased then dropped and net income slid i...View the full answer
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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