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The following data were extracted from the income statement of Brecca Systems Inc.: (a) Determine for each year(1) The inventory

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The following data were extracted from the income statement of Brecca Systems Inc.:

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(a) Determine for each year(1) The inventory turnover and(2) The number of days' sales in inventory. Round to nearest dollar and one decimal place.(b) What conclusions can be drawn from these data concerning theinventories?

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Current Year Preceding Year Sales Beginning inventories Cost of goods sold Ending inventories $1,192,320 $1,139,600 64,000 662,400 80,000 569,800 74,000

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Accounting

Accounting

ISBN: 978-0324662962

23rd Edition

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

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Question Details
Chapter # 17- Financial Statement Analysis
Section: Exercises
Problem: 11
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Question Posted: August 29, 2011 18:52:38
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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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