Callahan Company reported the following information for the current year: Net sales revenue ............................. $280,000 Cost of

Question:

Callahan Company reported the following information for the current year:

Net sales revenue ............................. $280,000

Cost of goods sold ............................. 120,000

Beginning inventory .............................. 5,000

Ending inventory ................................ 10,000

Required:

1. Compute Callahan's

(a) Gross profit ratio,

(b) Inventory turnover ratio, and

2. Explain the meaning of each number.

Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...