(Evaluating inventory management, LO 2) Zawale Ltd. (Zawale) is a wholesaler of fresh fruits and vegetables. Zawale purchases fruits and vegetables from growers and supplies them to small grocery stores. You have been provided with the follow- ing information from Zawale’s accounting records:

Required:

a. Calculate Zawale’s inventory turnover ratio for 2004, 2005, and 2006.

b. Calculate Zawale’s average number of days inventory on hand for 2004, 2005, and 2006.
Evaluate how well Zawale’s management is managing the inventory. Explain.

d. What are some possible explanations for the amounts you calculated in parts

(a) and (b)?

e. What are the implications for Zawale’s performance of the results you found in parts

(a) and (b)? Explain.

Transcribed Image Text:

2003 2004 2005 2006 Inventory (on December 31) Cost of sales (for the year ended) $65,000 $ 73,000 $ 81,000 $ 130,000 4,200,000 4,830,000 4,588,500