For each ratio listed, identify whether the change in ratio value from 2010 to 2011 is usually
Question:
Ratio 2011 2010 Ratio 2011 2010 l. Profit margin 2. Debt ratio 3. Gross margin 4. Acid-test ratio 8% 45% 33% 0.99 6% 40% 45% 1O 5. Accounts receivable turnover 6. Basic earnings per share 7. Inventory turnover 8. Dividend yield 5.4 6.6 $1.24 $1.20 3.53.3 1% 0.8%
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Ratio 2011 2010 Change 1 Profit Margin 8 6 Favorable 2 Debt Ratio ...View the full answer
Fundamental Accounting Principles
ISBN: 978-0078110870
20th Edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
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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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