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The following data were extracted from the income statement of Mountain Sports Inc.: a. Determine for each

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The following data were extracted from the income statement of Mountain Sports Inc.:


The following data were extracted from the income statement of 119859


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

Transcribed Image Text:

Sales Beginning inventories Cost of goods sold Ending inventories 2007 $656,000 42,000 328,000 40,000 2006 774,000 44,000 430,000 42,000

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a 1 2 1 899 328000 365 days 2 1178 430000 365 days b The inventory position of the business has de...View the full answer


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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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