(a)
Inventory turnover ratio: Inventory turnover ratio is used to determine the number of times inventory used or sold during the particular accounting period. The formula to calculate the inventory turnover ratio is as follows:
Days’ sales in inventory: Days’ sales in inventory are used to determine number of days a particular company takes to make sales of the inventory available with them. The formula to calculate the days’ sales in inventory ratio is as follows:
To determine: the inventory turnover for Company T and Company A.
(b)
the Days’ sales in inventory ratio Company T and Company A.
(c)
To state: the company that has better inventory efficiency.
(d)
To explain: the difference in inventory efficiency between two companies.
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Financial & Managerial Accounting
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