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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Inventory analysis

A company reports the following:

Cost of goods sold $660,000
Average inventory 60,000

Determine (a) the inventory turnover and (b) the number of days’ sales in inventory. Round to one decimal place.

a)

To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

To compute: Inventory turnover ratio

Given info: Cost of goods sold and average inventory

Explanation

Inventory turnover ratio is used to determine the number of times inventory used or sold during the particular accounting period.

Formula:

b)

To determine

To compute: Number of days sales in inventory.

Given info: Average inventory and average daily cost of goods sold.

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