FINANCIAL+MANAG.ACCT - CONNECT ACCESS
9th Edition
ISBN: 9781265318420
Author: Wild
Publisher: MCG
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When analyzing financial statements, what can you conclude when the inventory turnover ratio increases from 4.0 to 6.0 over a three year period.
Group of answer choices
a. The day’s inventory held are within the typical industry average
b. The day’s inventory held has increased over time
None of the above
c. The day’s inventory held has decreased over time
Selected comparative financial statements of Haroun Company follow.
HAROUN COMPANY
Comparative Income Statements
For Years Ended December 31, 2021-2015
($ thousands)
Sales
2021
Cost of goods sold
$ 1,769
1,271
2020
$ 1,549
2019
2018
2017
2016
2015
$ 1,410
$ 1,292
$ 1,206
$ 1,121
$ 919
1,034
889
778
723
676
539
Gross profit
498
515
521
514
483
445
380
Operating expenses
Net income
377
295
271
200
173
171
142
$ 121
$ 220
$ 250
$ 314
$ 310
$ 274
$ 238
HAROUN COMPANY
Comparative Year-End Balance Sheets
December 31, 2021-2015
($ thousands)
Assets
Cash
Accounts receivable, net
Merchandise inventory
Other current assets
Long-term investments
Plant assets, net
Total assets
Liabilities and Equity
2021
2020
2019
2018
2017
2016
2015
$ 108
773
$ 142
812
$ 148
735
2,797
2,036
1,779
$ 151
564
1,499
$ 157
496
$ 155
$ 160
470
332
1,346
1,144
829
72
65
40
71
60
61
32
e
B
220
220
220
220
3,422
3,409
2,982
1,683
$ 7,172
$ 6,464
$ 5,684
$ 4,188
$ 4,019
1,740
1,546
$ 3,596
$ 2,900
1,327
Current liabilities…
Jenna Baker, CEO of Baker Mfg Inc., wishes to compare her company's inventory turnover to those of industry leaders, who have turnover of about 13 times per year and 8% of their assets invested in inventory.
Baker Mfg. Inc.
Net Revenue
Cost of sales
Inventory
Total assets
a) What is Baker's inventory turnover? times per year (round your response to two decimal places).
b) What is Baker's percentage of assets committed to inventory?% (enter your response as a percentage rounded to two decimal places).
c) How does Baker's performance compare to the industry leaders?
$27,500
$21,450
$1,300
$16,970
Chapter 5 Solutions
FINANCIAL+MANAG.ACCT - CONNECT ACCESS
Ch. 5 - Prob. 1QSCh. 5 - Prob. 2QSCh. 5 - Prob. 3QSCh. 5 - Prob. 4QSCh. 5 - Perpetual: Inventory costing with FIFO P1 A...Ch. 5 - Prob. 6QSCh. 5 - Prob. 7QSCh. 5 - Prob. 8QSCh. 5 - Prob. 9QSCh. 5 - A Periodic: Inventory costing with weighted...
Ch. 5 - Prob. 11QSCh. 5 - Prob. 12QSCh. 5 - Perpetual: Inventory costing with weighted average...Ch. 5 - Prob. 14QSCh. 5 - Prob. 15QSCh. 5 - Prob. 16QSCh. 5 - Prob. 17QSCh. 5 - Prob. 18QSCh. 5 - Prob. 19QSCh. 5 - Prob. 20QSCh. 5 - Prob. 21QSCh. 5 - Prob. 22QSCh. 5 - Prob. 23QSCh. 5 - Prob. 24QSCh. 5 - Prob. 25QSCh. 5 - Prob. 26QSCh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Exercise 5-3 Perpetual: Inventory costing methods...Ch. 5 - Prob. 4ECh. 5 - Prob. 5ECh. 5 - Prob. 6ECh. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - Prob. 10ECh. 5 - Prob. 11ECh. 5 - Prob. 12ECh. 5 - Prob. 13ECh. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Prob. 18ECh. 5 - Prob. 19ECh. 5 - Prob. 20ECh. 5 - Prob. 21ECh. 5 - Prob. 1PSACh. 5 - Prob. 2PSACh. 5 - Prob. 3PSACh. 5 - Problem 5-4AA Periodic: Alternative cost flows...Ch. 5 - Prob. 5PSACh. 5 - Prob. 6PSACh. 5 - Prob. 7PSACh. 5 - Prob. 8PSACh. 5 - Prob. 9PSACh. 5 - Prob. 10PSACh. 5 - Prob. 1PSBCh. 5 - Prob. 2PSBCh. 5 - Prob. 3PSBCh. 5 - Prob. 4PSBCh. 5 - Prob. 5PSBCh. 5 - Prob. 6PSBCh. 5 - Prob. 7PSBCh. 5 - Problem 5-8BA Periodic: Income comparisons and...Ch. 5 - Prob. 9PSBCh. 5 - Prob. 10PSBCh. 5 - Prob. 5SPCh. 5 - Prob. 1.1AACh. 5 - Prob. 1.2AACh. 5 - Prob. 1.3AACh. 5 - Prob. 1.4AACh. 5 - Prob. 2.1AACh. 5 - Prob. 2.2AACh. 5 - Prob. 2.3AACh. 5 - Prob. 3.1AACh. 5 - Prob. 3.2AACh. 5 - Prob. 3.3AACh. 5 - Describe how costs flow inventory to cost of goods...Ch. 5 - Where is the amount of merchandise inventory...Ch. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - What factors contribute to (or cause) inventory...Ch. 5 - Prob. 8DQCh. 5 - Prob. 1BTNCh. 5 - Prob. 2BTNCh. 5 - Prob. 3BTNCh. 5 - Prob. 5BTN
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Similar questions
- Financial statement data for years ending December 31 for Tango Company follow: a. Determine the inventory turnover for 20Y7 and 20Y6. b. Determine the days sales in inventory for 20Y7 and 20Y6. Use 365 days and round to one decimal place. c. Does the change in inventory turnover and the days sales in inventory from 20Y6 to 20Y7 indicate a favorable or an unfavorable trend?arrow_forwardLast year, Nikkola Company had net sales of 2,299,500,000 and cost of goods sold of 1,755,000,000. Nikkola had the following balances: Refer to the information for Nikkola Company above. Required: Note: Round answers to one decimal place. 1. Calculate the average inventory. 2. Calculate the inventory turnover ratio. 3. Calculate the inventory turnover in days. 4. CONCEPTUAL CONNECTION Based on these ratios, does Nikkola appear to be performing well or poorly?arrow_forwardA manufacturer reported an inventory turnover ratio of 8.6 last year. During the current year, management introduced a new inventory control system that was expected to reduce average inventorylevels by 25 percent without affecting sales volume. Given these circumstances, would you expectthe inventory turnover ratio to increase or decrease during the current year? Explain.arrow_forward
- The following data were extracted from the income statement of Keever Inc.: Current Year Previous Year Sales $788,400 $827,800 Beginning inventories 57,564 39,692 Cost of goods sold 394,200 459,900 Ending inventories 52,164 57,564 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 the final answers to one decimal place. Assume 365 days a year. Current Year Previous Year 1. Inventory turnover fill in the blank 1 fill in the blank 2 2. Number of days' sales in inventory fill in the blank 3 days fill in the blank 4 days b. The inventory position of the business has improveddeteriorated . The inventory turnover has increaseddecreased , while the number of days' sales in inventory has increaseddecreased .arrow_forwardTo measure inventory management performance, a company monitors its inventory turnover ratio. Listed below are selected data from the company's accounting records: Current year $2,525,000 40% Beginning finished goods inventory for the current year was 15% of the prior-year's annual sales volume at cost, and ending finished goods inventory was 22% of the current-year's annual sales volume at cost. What was the company's inventory turnover at the end of the current period? (D) Annual sales Gross profit percent Prior year $2,125,000 35%arrow_forwardThe analysis of Inventory Turnover Ratio is as follows: 2015: 4.34 2016: 3.15 2017: 4.76 2018: 2.94 2019: 5.32 a. What is the trend analysis for that Inventory Turnover Ratio and why it is increasing/decreasing?arrow_forward
- Bulldogs Inc. has recently calculated the inventory turnover for the currently year to be 30. In prior years, the same ratio was always lower. Which of the following statements would be the best interpretation for the reason for the ratio’s change? a. The company purchased less inventory in the current year than in prior years. b. The company had less sales in the current year than in prior years. c. The company took more days to sell its inventory in the current year than in prior years. d. The company took fewer days to sell its inventory in the current year than in prior years.arrow_forward15. Farrell's Window Supply has seen an increase in sales, but the company is concerned with its inventory management. Has the increase in sales caused the company's ability to manage inventory effectively to decrease? Support your answer by finding the changes in inventory turnover and number of days' sales in inventory. Round ratios to one decimal place. Inventory: Beginning of year End of year Purchases of inventory 20Y6 2015 $350,900 $352,300 325,400 350,900 330,600 325,200 shulpsins, of woted notandin YOS has 2Y02 dinaarrow_forwardThe following data were extracted from the income statement of Keever Inc.: Current Year Previous Year Sales $1,518,400 $1,589,900 Beginning inventories 88,856 81,230 Cost of goods sold 759,200 883,300 Ending inventories 80,456 88,856 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 the final answers to one decimal place. Assume 365 days a year. Current Year Previous Year 1. Inventory turnover fill in the blank 1 fill in the blank 2 2. Number of days' sales in inventoryarrow_forward
- What is the comparison (analysis) of the Inventory Turnover Ratio of Industry Average Ratio and the Company A Ratio? The Inventory Turnover Ratio has decreased and increased. Why? Industry Average Inventory Turnover Ratio 2015: 5.89 2016: 4.95 2017: 5.51 2018: 8.20 2019: 10.28 Company A Inventory Turnover Ratio 2015: 4.34 2016: 3.15 2017: 4.76 2018: 2.94 2019: 5.32arrow_forwardBased on the following data for the current year, what is the inventory turnover? Sales on account during year $545,223 Cost of goods sold during year 151,374 Accounts receivable, beginning of year 47,010 Accounts receivable, end of year 47,369 Inventory, beginning of year 39,811 Inventory, end of year 39,291 Do not round interim calculations. Round your final answer to one decimal place.arrow_forwardThe following data were extracted from the income statement of Keever Inc.: Current Year Previous Year Sales $1,095,000 $1,143,200 Beginning inventories 60,050 52,050 Cost of goods sold 547,500 635,100 Ending inventories 54,250 60,050 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 the final answers to one decimal place. Assume 365 days a year.arrow_forward
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