Analyzing Inventory Examining the recent financial statements of Etherington Fashion Corporation you note the following: Sales $754,693 Cost of goods sold: Computed under FIFO 505,300 Computed under LIFO 553,500 Average inventory: Computed under FIFO 76,900 Computed under LIFO 45,800 Required: 1. Calculate Etherington's gross profit ratio (rounded to two decimal places), inventory turnover ratio (rounded to three decimal places), and the average days to sell inventory (assume a 365-day year and round to two decimal places) using the FIFO inventory costing method.

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.