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The following data were taken from the income statements of Mydorf Company. _____________________________2019 2018 Sales revenue..$6,420,000$6,240,000 Beginning

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The following data were taken from the income statements of Mydorf Company.

_____________________________2019                          2018

Sales revenue…………………..$6,420,000……$6,240,000

Beginning inventory………………960,000……….840,000

Purchases………………………..4,840,000…......4,661,000

Ending inventory………………..1,020,000……….960,000

(a) Compute for each year

(1) The inventory turnover and 

(2) Days in inventory.

(b) What conclusions concerning the management of the inventory can be drawn from these data?

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...
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a Inv turnover CGS Ave inv 2019 960000 4840000 1020000 960000 1020000 2 b Days in inventory 365 ...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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