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Given the following financial data for a company: Net Sales: $3,000,000 Cost of Goods Sold: $1,800,000 Average Inventory: $400,000 Total Current Assets: $700,000 Total Current

Given the following financial data for a company:

  • Net Sales: $3,000,000
  • Cost of Goods Sold: $1,800,000
  • Average Inventory: $400,000
  • Total Current Assets: $700,000
  • Total Current Liabilities: $300,000
  • Total Assets: $2,000,000
  • Total Liabilities: $1,000,000
  • Net Income: $300,000
  • Shareholders’ Equity: $1,000,000

Calculate the Inventory Turnover Ratio (COGS divided by Average Inventory) and explain its significance in assessing the efficiency of inventory management. Determine the Current Ratio (Total Current Assets divided by Total Current Liabilities) and discuss how this ratio is used to evaluate the company’s short-term financial health.

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