The following data are from the income statements of Ellen Noodles Company: (a) Compute for each year
Question:
The following data are from the income statements of Ellen Noodles Company:
(a) Compute for each year
(1) The inventory turnover and
(2) The average days to sell the inventory.
(b)What conclusions concerning the management of the inventory can be drawn from thesedata?
2009 $6,420,000 94511,000 4,540,000 1,020,000 2008 Sales $6,240,000 860,000 4,661,000 960,000 Beginning inventory Purchases Ending inventory
Step by Step Answer:
a Inventory turnover Cost of goods soldAverage inventory 1 2 ...View the full answer
Hospitality Financial Accounting
ISBN: 978-0470083604
2nd Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Agnes L.
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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