Concept explainers
(a) (1)
Annual Report:
Annual report is a comprehensive financial report that shows all the business activities, that takes place throughout the previous financial year. Its purpose is to provide the complete information of a company’s financial activities, to its users in order to help them analyze, and take well informed decisions.
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 is calculated by using the following formula:
To Compute: The inventory turnover of Company P, and Company C for 2015.
(2)
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.
To Compute: The days in turnover of Company P, and Company C for 2015.
(b)
To Describe: The conclusions concerning the management of the inventory can be drawn from the above data.

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Chapter 6 Solutions
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