Financial statement data for years ending December 31 for Holland Company follow: _______________________________ 20Y4 _______________ 20Y3 Cost
Question:
_______________________________ 20Y4 _______________ 20Y3
Cost of merchandise sold ............ $4,504,500 ............ $3,715,200
Inventories:
Beginning of year ....................... 788,000 ................. 760,000
End of year .............................. 850,000 ................. 788,000
a. Determine the inventory turnover for 20Y4 and 20Y3.
b. Determine the days' sales in inventory for 20Y4 and 20Y3. Use 365 days and round to one decimal place.
c. Does the change in inventory turnover and the days' sales in inventory from 20Y3 to 20Y4 indicate a favorable or an unfavorable trend?
Step by Step Answer:
a Inventory Turnover 20Y4 20Y3 Cost of merchandise sold 4504500 3715200 Inv...View the full answer
Accounting
ISBN: 978-1337899451
27th 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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