Using the Indigo financial statements in Appendix III, calculate the following ratios for the year ended March
Question:
Using the Indigo financial statements in Appendix III, calculate the following ratios for the year ended March 29, 2014 and March 30, 2013. Comment on the change and consider whether the ratios make sense given the nature of the company’s operations. a. Inventory turnover ratio (Round to two decimal places)
b. Days sales in inventory (Round to the nearest day).
Inventory Turnover Ratio Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,...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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2014 2013 a Inventory turnover ratio 493955000 227 218979000 2165330002 495099000 222 216533000 22...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.