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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Twenty metrics of liquidity, solvency, and profitability

The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $119.70 on December 31, 20Y8


Instructions

Inventory turnover

To determine

Concept Introduction:

Inventory Turnover Ratio:

Inventory Turnover Ratio measures the efficiency of the company in converting its inventory into sales. It is calculated by dividing the Cost of goods sold by the Average inventory. The formula of the Inventory Turnover Ratio is as follows:

  Inventory Turnover Ratio=Cost of goods soldAverage inventory

Note: Average inventory is calculated with the help of following formula:

  Average inventory=(Beginning inventory + Ending inventory)2

Day's sales in inventory:

Days sales in inventory represent the number of days the inventory waits for the sale. It is calculated using the following formula:

  Day Sales in Inventory =  Inventory *365Cost of Goods Sold 

To Calculate:

The Inventory Turnover.

Explanation

The Inventory Turnover is calculated as follows:

    20Y8
    Cost of Goods Sold (A) $ 5,350,000
    Beginning Inventory (B)

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