Rouse Incorporated reported sales, cost of sales, and inventory figures for 2010 and 2011 as follows (all
Question:
What is the amount of inventory turnover for each year, and in which year did Rouse manage its inventory mostefficiently?
Sales . .. $100 110 Cost of Goods Sold $85 90 Inventory $27 35 2010 2011
Step by Step Answer:
Inventory turnover for 2010 85 27 315 Inventory turnover for 2011 90 35 257 The turno...View the full answer
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
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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