The Robinson Company had a cost of goods sold of $1,000,000 in 2016 and $1,200,000 in 2017.
Question:
The Robinson Company had a cost of goods sold of $1,000,000 in 2016 and $1,200,000 in 2017.
a. Calculate the inventory turnover for each year. Comment on your findings.
b. What would have been the amount of inventories in 2017 if the 2016 turnover ratio had been maintained?
Step by Step Answer:
a 2016 1000000350000 286 2017 1200000500000 2...View the full answer
Introduction to Finance Markets, Investments and Financial Management
ISBN: 978-1119398288
16th edition
Authors: Ronald W. Melicher, Edgar A. Norton
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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