You are analyzing ABC Company, a computer manufacturer. You notice that inventory turnover this year is significantly lower than in prior years. You also notice that accounts receivable turnover is significantly lower this year when compared to previous years. Provide three explanations that would be consistent with your observation for inventory turnover and
You are analyzing ABC Company, a computer manufacturer. You notice that inventory turnover this year is significantly lower than in prior years. You also notice that
Following are might be the reasons for lower inventory ratio when compare to prior period .
1.Change in method used for valuation of inventory.For example change from FIFO method to LIFO which will results differenet turnover ratio
2.Decrease in sales when compared to prior periods
3.Increase in inventory levels compared to prior periods
Following are might be the reasons for accounts receivable turnove's ratio when compare to prior period .
1.Decrease in debtor's cash collections
2.Increase in bad debts.
3.Decrease in sales when compared to prior periods.
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