Montcalm Corp. has current liabilities of $365,000, a quick ratio of 0.85, inventory turnover of 5.8, and
Question:
Montcalm Corp. has current liabilities of $365,000, a quick ratio of 0.85, inventory turnover of 5.8, and a current ratio of 1.4. What is the cost of goods sold for the company?
Step by Step Answer:
The only ratio given which includes cost of goods sold is the inventory turnover ratio so it is t...View the full answer
Fundamentals of Corporate Finance
ISBN: 978-0071051606
8th Canadian Edition
Authors: Stephen A. Ross, Randolph W. Westerfield
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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