Asked by Nolan Blackwell on May 26, 2024
Verified
A company reports the following:
Cost of goods sold....................$610,000
Average inventory.....................80,000?
Determine the (a) inventory turnover and (b) number of days' sales in inventory. Round your answers to one decimal place.
Inventory Turnover
A ratio showing how many times a company's inventory is sold and replaced over a particular period, indicating the efficiency of inventory management.
Days' Sales
A financial metric estimating the number of days required to convert a company's inventory into sales, also known as inventory turnover period.
Cost Of Goods Sold
The expenses directly associated with manufacturing products that a company sells.
- Compute and elucidate standard financial ratios including the current ratio, quick ratio, inventory turnover, accounts receivable turnover, and times interest earned.
Verified Answer
ML
michael layneJun 02, 2024
Final Answer :
(a)Inventory Turnover = Cost of Goods Sold/Average InventoryInventory Turnover = $610,000/$80,000Inventory Turnover = 7.6
(b)Number of Days' Sales in Inventory = Average Inventory/Average Daily Cost ofGoods SoldNumber of Days' Sales in Inventory = $80,000/
($610,000/365)Number of Days' Sales in Inventory = 47.9 days
(b)Number of Days' Sales in Inventory = Average Inventory/Average Daily Cost ofGoods SoldNumber of Days' Sales in Inventory = $80,000/
($610,000/365)Number of Days' Sales in Inventory = 47.9 days
Learning Objectives
- Compute and elucidate standard financial ratios including the current ratio, quick ratio, inventory turnover, accounts receivable turnover, and times interest earned.