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Business

Accounting

Is it possible to have a high inventory turnover and a high number of days’ sales in inventory? Why?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 5DQ

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Which of the following indicates a positive trend for inventory management? A. increasing number of days sales in inventory ratio B. increasing inventory turnover ratio C. increasing cost of goods sold D. increasing sales revenue
A high inventory turnover ratio provides evidence that a company is having problems with stockouts and disgruntled customers. Do you agree? Explain.
Which of the following is an advantage of the periodic inventory system? A. frequent physical inventory counts B. cost prohibitive C. time consuming D. real-time information for managers
When would using the FIFO inventory costing method produce higher inventory account balances than the LIFO method would? A. inflationary times B. deflationary times C. always D. never
Use the following information relating to Shana Company to calculate the inventory turnover ratio and the number of days sales in inventory ratio.
Use the following information relating to Singh Company to calculate the inventory turnover ratio and the number of days sales in inventory ratio.
a. Why is a high inventory turnover considered to be a positive indicator?b. Is it possible to have a high inventory turnover and a high number of days’ sales in inventory? Why?
Which of the following is used to analyze the efficiency and effectiveness of inventory management? inventory turnover only days’ sales in inventory only both inventory turnover and days’ sales in inventory neither inventory turnover nor days’ sales in inventory
Which of the following is false? Select one: a. Days’ sales in inventory is equal to the average number of days it takes to sell inventory. b. Higher days’ sales in inventory means that inventory is less likely to become obsolete because it is sold in fewer days c. Inventory ratio is equal to the number of times inventory was completely purchased and sold (turned over) during the period. d. Inventory turnover ratio is calculated by dividing COGS by the average value of inventory over the period.
How can accounting keep up with the rising sales return rates, especially when it comes to inventory management?
Which of the following is false? Select one: a. Day's sales in inventory is equal to the average number of days it takes to sell inventory b. Higher Day's sales in inventory means that inventory is less likely to become obsolete because it is sold in fewer days c. Inventory ratio is equal to the number of times inventory was completely purchased and sold (turn over) during the period d. Inventory turnover ratio is calculated by dividing COGS by the average value of inventory over the period
What does a very high inventory turnover ratio signify? Please provide your own example to explain your point.