Inventory Turnover and: Inventory Turnover ratio is a measure of the number of times an entity’s inventory is replaced in a year with respect to the entity’s cost of goods sold. It is essential to track the Inventory Turnover during a given period of time, such as a reporting period for Financial Statements, in order to see the strength of sales and volumes of sales and inventory rolled over during a reporting period. The higher the Inventory Turnover ratio, the greater the strength of the company’s sales and more is the inventory sold during a reporting period. Inventory Turnover Ratio = Company's Cost of Goods Sold over the reporting period Average Balance of Inventory over the reporting period Average Sale Period Average Sale period is the Average number of days that it takes to sell the average inventory procured over the course of a reporting period. Average Sale period is calculated in Days by dividing 365 Days by the Inventory turnover ratio. Average Sale period helps in tracking the reconciliation between the average time that inventory is rolled over and costs of having inventory on hand Average Sale Period = 365 Inventory Turnover Ratio To Compute: Inventory Turnover and Average Sale Period

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Chapter 15, Problem 10F15

To determine

Concept Introduction: Inventory Turnover and:

Inventory Turnover ratio is a measure of the number of times an entity’s inventory is replaced in a year with respect to the entity’s cost of goods sold.
It is essential to track the Inventory Turnover during a given period of time, such as a reporting period for Financial Statements, in order to see the strength of sales and volumes of sales and inventory rolled over during a reporting period.
The higher the Inventory Turnover ratio, the greater the strength of the company’s sales and more is the inventory sold during a reporting period.

Inventory Turnover Ratio =Company's Cost of Goods Sold over the reporting periodAverage Balance of Inventory over the reporting period

Average Sale Period

Average Sale period is the Average number of days that it takes to sell the average inventory procured over the course of a reporting period.
Average Sale period is calculated in Days by dividing 365 Days by the Inventory turnover ratio.
Average Sale period helps in tracking the reconciliation between the average time that inventory is rolled over and costs of having inventory on hand

Average Sale Period =365Inventory Turnover Ratio

To Compute:

Inventory Turnover and Average Sale Period

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