Chapter 5, Problem 5.23E

Requirement – 1

To determine

Inventory Turnover:

It is a part of liquidity ratios used during the process of ratio analysis. It reflects the number of times a company’s inventory is converted into sale during a particular period.

The formula to compute inventory turnover:

$\text{Inventory Turnover}=\frac{\text{Cost of Goods Sold}}{\text{Average Inventory }}$

To calculate: The inventory turnover ratio of Company R.

Requirement – 2

To determine

To describe: The useful information that the inventory ratio provides.