During the audit of a dealership selling only new luxury automobiles, the auditors calculated the year 2
Question:
Select the most reasonable explanation the controller will provide relating to year 2 for each change. An explanation may be used once, more than once, or not at all. Consider each ratio independently?
Year 2 32 4.01 3.2 10.5% 19.1% Year 1 20 6.32 4.3 12.2% 23.2% Explanations Question 1 Question 2 Question 3 Question 4 Question 5 Ratios Days sales in accounts receivable Inventory turnover Debt to equity Return on assets Net fixed assets to equity
Step by Step Answer:
1 Days sales in accounts receivable ratio has increased to 32 in Year 2 from 20 in Year 1 This ratio ...View the full answer
Principles of Auditing and Other Assurance Services
ISBN: 978-0077729141
20th edition
Authors: Ray Whittington, Kurt Pany
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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