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LaTour Inc. is based in France and prepares its financial statements (in euros) in accordance with IFRS.

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LaTour Inc. is based in France and prepares its financial statements (in euros) in accordance with IFRS. In 2020, it reported cost of goods sold of €578 million and average inventory of €154 million. Briefly discuss how analysis of LaTour’s inventory turnover (and comparisons to a company using GAAP) might be affected by differences in inventory accounting between IFRS and GAAP.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Under IFRS LaTours inventory turnover is computed as follows Co...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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