Inventory turnover and number of days’ sales in inventory
Financial statement data for years ending December 31 for Tango Company follows:
(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:
inventory turnover for 2016 and 2015.
The inventory turnover ratio is calculated by dividing cost of goods sold by average inventory during the period. The average inventory is calculating by dividing beginning inventory and ending inventory by 2...
(b)
Days’ sales in inventory ratio for 2016 and 2015.
(c)
To explain: if change in turnover and days’ sales in inventory from 2015 to 2016 indicate favorable or unfavorable trend.
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