Chapter 6, Problem 6.13E

To determine

Inventory turnover ratio:

Inventory turnover ratio is a financial measure that is used to evaluate as to how many times a company sells or uses its inventory during an accounting period. It can be calculated by using the following formula:

$\text{Inventory turnover = }\frac{\text{Cost of goods sold}}{\text{Average inventory}}$

Days’ sales in 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.

$\text{Days' sales in inventory}=\frac{\text{Days in accounting period}}{\text{Inventory turnover}}$

Gross Profit Percentage:

Gross profit percentage is the financial ratio that shows the relationship between the gross profit and net sales. It represents gross profit as a percentage of net sales. Gross Profit is the difference between the total revenue and the cost of goods sold. It can be calculated by using the following formula:

$\text{Gross profit percentage}=\frac{\text{ Gross profit}}{\text{Net sales}}\times 100$

Note: $\text{Gross profit}=\text{Net sales – Cost of goods sold }$

To Calculate: The inventory turnover for 2013, 2014, and 2015 of Corporation P.

To determine

To calculate: The days in inventory of Corporation P for 2013, 2014, and 2015.

To determine

To Calculate: The gross profit rate of Corporation P for 2013, 2014, and 2015.

To determine

To Comment: On the above observed trends.