The following data are available for 2012, regarding the inventory of two companies. Compute inventory turnover (round
Question:
The following data are available for 2012, regarding the inventory of two companies.
Compute inventory turnover (round to the nearest hundredth) and number of days' sales in inventory (round to the nearest tenth) for both companies. Which company is managing its inventory moreefficiently?
Atkins Burbank Electronics Computers Beginning inventory. Ending inventory Cost of goods sold $ 100,000 $ 50,000 750,000 1,000,000
Step by Step Answer:
Atkins Inventory turnover 75000055000 1364 times Number of days sales in inv...View the full answer
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
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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