Chapter 6, Problem 6.2BYP

(a)

(1)

To determine

Comparative analysis: The analysis of financial performance of the companies using financial comparables is referred to as comparative analysis.

Inventory turnover ratio: This 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.

Formula:

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

Days’ in inventory: Days’ in inventory are used to determine number of days a particular company takes to make sales of the inventory available with them.

Formula:

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

To compute: The inventory turnover of Company TR, and Company H for 2011.

(b)

To determine

To describe: The conclusions regarding the inventory management that could be drawn from the above computations.