Financial statement data for years ending December 31 for Holland Company follows: a. Determine the inventory turnover
Question:
a. Determine the inventory turnover for 2016 and 2015.
b. Determine the number of days' sales in inventory for 2016 and 2015. Use 365 days and round to one decimal place.
c. Does the change in inventory turnover and the number of days' sales in inventory from 2015 to 2016 indicate a favorable or an unfavorable trend?
TGo 2015 Cost of merchandise sold Inventories: $4,504,500 $3,715,200 Beginning of year End of year 788,000 850,000 760,000 788,000
Step by Step Answer:
a b c The increase in the inventory turnover from 48 to 55 and the decrease in the number o...View the full answer
Accounting
ISBN: 978-1285743615
26th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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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