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LanWan Software, Inc., earned sales revenue of $65,000,000 in 2012. Cost of goods sold was $39,000,000, and

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LanWan Software, Inc., earned sales revenue of $65,000,000 in 2012. Cost of goods sold was $39,000,000, and net income reached $9,000,000, the company’s highest ever. Total current assets included inventory of $3,000,000 at December 31, 2012. Inventory was $5,000,000 on December 31, 2011.
Requirement
1. Compute the company’s gross profit percentage and rate of inventory turnover for 2012.

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Req 1 Dollar amounts in millions 2012 G...View the full answer


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Financial and Managerial Accounting

Financial and Managerial Accounting

ISBN: 978-0132497978

3rd Edition

Authors: Horngren, Harrison, Oliver

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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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