Inventory Analysis

The following data were extracted from the income statement of Keever Inc.:

	Current Year		Previous Year
Sales	$18,500,000		$20,000,000
Beginning inventories	940,000		860,000
Cost of goods sold	9,270,000		10,800,000
Ending inventories	1,120,000		940,000

a. Determine for each year (1) the inventory turnover and (2) the number of days' sales in inventory. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume 365 days a year.

	Current Year	Previous Year
1. Inventory turnover
2. Number of days' sales in inventory	days	days

b. The inventory position of the business has deteriorated . The inventory turnover has decreased , while the number of days' sales in inventory has increased . The sales volume has declined faster than the inventory, resulting in a deteriorating inventory position.