![Principles of Financial Accounting.](https://www.bartleby.com/isbn_cover_images/9780077632892/9780077632892_largeCoverImage.gif)
1.
Compute inventory turnover for each company for the most recent years shown.
1.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Inventory turnover:
This is the ratio which analyzes the number of times inventory is sold during the period. This ratio gauges the efficacy of inventory management. Larger the ratio, more efficient the inventory management.
Calculate inventory ratio for Company A’s current year as follows:
Calculate inventory ratio for Company A’s one year prior as follows:
Calculate inventory turnover ratio for Company G’s current year as follows:
Calculate inventory turnover ratio for Company G’s one year prior as follows:
2.
Compute days’ sales inventory for each company for three years shown.
2.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Days’ sales Inventory:
Days’ sales in inventory are used to determine number of days a particular company takes to make sales of the inventory available with them.
Calculate days’ sales inventory for the Company A’s current year as follows:
Calculate days’ sales inventory for the company A’s one year prior as follows:
Calculate days’ sales inventory for the Company A’s two year prior as follows:
Calculate days’ sales inventory for the Company G’s current year as follows:
Calculate days’ sales inventory for the Company G’s one year prior as follows:
Calculate days’ sales inventory for the Company G’s two year prior as follows:
3.
Comment and interpret your findings from parts 1 and 2. Assume an industry average for inventory turnover of 15.
3.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Interpret and Comment:
- Company A’s inventory turnover ratio is more efficient than Company G.
- Company A’s days’ sales inventory is fewer than company G.
- Company A’s inventory turnover ratio is more than the industry average of 15 for inventory turnover for both the current year and prior year, but Company G is slightly below the industry average in both the current year and prior years.
- Company G’s days’ sales inventory seems a bit too high comparing with the Company A.
Want to see more full solutions like this?
Chapter 6 Solutions
Principles of Financial Accounting.
- I want to correct answer general accounting questionarrow_forwardHelp me this question general accountingarrow_forwardAnalyze each of the following transactions and show the effect on the accounting equation. Transactions 1. Issue 10,000 shares of common stock in exchange for $32,000 in cash. 2. Purchase land for $19,000. A note payable is signed for the full amount. 3. Purchase equipment for $8,000 cash. 4. Hire three employees for $2,000 per month. Salaries are not paid until the end of the month. 5. Receive cash of $12,000 in rental fees for the current month. 6. Purchase office supplies for $2,000 on account. 7. Pay employees $6,000 for the first month's salaries. Dual Effectarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
![Text book image](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)