Concept explainers
Videos
Concept Introduction:
Ratio Analysis:
Ratio analysis is a study of several key metrics of a company based on the data presented in its' financial statements with an objective to evaluate the financial health of a company.
It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.
Inventory turnover − A measure of the relation between the turnover and inventory measured in number of times.
It seeks to measure the relation of the inventory rolled over in proportion to the total turnover and is an indicator of how much of the inventory is fast moving in relation to the total turnover.
Days Sale in Inventory − A measure of the total outstanding collections for credit sales in terms of inventory.
It is calculated to understand how many days sales in terms of inventory are available to the company.
Requirement 2:
Inventory Turnover Ratio and Days Sale in Inventory as on March 31, 2020
Concept Introduction:
Ratio Analysis:
Ratio analysis is a study of several key metrics of a company based on the data presented in its' financial statements with an objective to evaluate the financial health of a company.
It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.
Inventory turnover − A measure of the relation between the turnover and inventory measured in number of times.
It seeks to measure the relation of the inventory rolled over in proportion to the total turnover and is an indicator of how much of the inventory is fast moving in relation to the total turnover.
Days Sale in Inventory − A measure of the total outstanding collections for credit sales in terms of inventory.
It is calculated to understand how many days sales in terms of inventory are available to the company.
Requirement 3:
Comment on Inventory Turnover Ratio and Days Sale in Inventory as on March 31, 2020 if the average Inventory Turnover is 15 and average Days Sale is 25 Days.
Want to see the full answer?
Check out a sample textbook solution
Chapter 6 Solutions
FUND.ACCT.PRIN.-CONNECT ACCESS
- What Is the correct answer A B ?? General Accounting questionarrow_forwardCullumber Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2025, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $16,800, direct labor $10,080, and manufacturing overhead $13,440. As of January 1, Job 49 had been completed at a cost of $75,600 and was part of finished goods inventory. There was a $12,600 balance in the Raw Materials Inventory account on January 1. During the month of January, Cullumber Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were sold on account during the month for $102,480 and $132,720, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $75,600 on account. 2. Incurred factory labor costs of $58,800. 3. Incurred manufacturing overhead costs as follows: depreciation expense on equipment $10,080; and various other…arrow_forwardAccounting questionarrow_forward
- Determine the cost of the patent.arrow_forwardAccounting questionarrow_forwardMs. Sharon Washton was born 26 years ago in Bahn, Germany. She is the daughter of a Canadian High Commissioner serving in that country. However, Ms. Washton is now working in Prague, Czech Republic. The only income that she earns in the year is from her Prague marketing job, $55,000 annually, and is subject to income tax in Czech Republic. She has never visited Canada. Determine the residency status of Sharon Washtonarrow_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:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education