Inventory Analysis A company's ability to manage its inventory effectively is evaluated using inventory analysis. It includes the computation and analysis of the following: - Inventory turnover - Number of days' sales in inventory hapter 17 Financial Statement Analysis Excess to invertory also increases the risk of losses because of prould keep Excess inventove or expand operations. obsolescence of the inve increases the risk of losses company should ontory. inventory in stock so that it doesn't lose sales because of 1ack of Inventory Turnover The inventory turnover is computed as follo Inventory Tumover =AverageInventoryCostofGoodssold, for 20Y6 and 205 is The increase in Lincoln's inventory turnover tron - inventory tum sales and a management of inventory has improved in 20Y6. The inventory tum. sales and a because of an increase in the cost of goods sold, which indicates more sales comdecrease in the average inventories. What is considered a good inventory turnover varies by type of inventory, comber pany, and industry. For example, grocery stores have a higher inventory turnovel foods than jewelers or furniture stores. Likewise, within a groc have a higher turnover than the soaps and cleansers. Number of Days' Sales in Inventory The number of days' sales in inventory is computed as follows: Number of Days' Sales in Inventory =AverageDailyCostofGoodsSoldAverageInventory AverageDailyCostofGoodsSold=365daysCostofGoodsSold where The number of days' sales in inventory is a rough measure of the length of time Fratad as follows: it takes to purchase, sell, and replace the inventory. Lincoln's number of days' sales in inventory improved from 132.2 days to 95.7 days during 20Y6. This is a major improvement in managing inventiory. Inventory Analysis A company's ability to manage its inventory effectively is evaluated using inventory analysis. It includes the computation and analysis of the following: - Inventory turnover - Number of days' sales in inventory hapter 17 Financial Statement Analysis Excess to invertory also increases the risk of losses because of prould keep Excess inventove or expand operations. obsolescence of the inve increases the risk of losses company should ontory. inventory in stock so that it doesn't lose sales because of 1ack of Inventory Turnover The inventory turnover is computed as follo Inventory Tumover =AverageInventoryCostofGoodssold, for 20Y6 and 205 is The increase in Lincoln's inventory turnover tron - inventory tum sales and a management of inventory has improved in 20Y6. The inventory tum. sales and a because of an increase in the cost of goods sold, which indicates more sales comdecrease in the average inventories. What is considered a good inventory turnover varies by type of inventory, comber pany, and industry. For example, grocery stores have a higher inventory turnovel foods than jewelers or furniture stores. Likewise, within a groc have a higher turnover than the soaps and cleansers. Number of Days' Sales in Inventory The number of days' sales in inventory is computed as follows: Number of Days' Sales in Inventory =AverageDailyCostofGoodsSoldAverageInventory AverageDailyCostofGoodsSold=365daysCostofGoodsSold where The number of days' sales in inventory is a rough measure of the length of time Fratad as follows: it takes to purchase, sell, and replace the inventory. Lincoln's number of days' sales in inventory improved from 132.2 days to 95.7 days during 20Y6. This is a major improvement in managing inventiory
