Chapter 6, Problem 6.4DIR

To determine

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 for inventory turnover ratio:

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

Days’ sales in inventory: Days’ sales in inventory are used to determine number of days a particular company takes to sell the stock.

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

To compute: The inventory turnover ratio, and days’ sales in inventory for Company D for 2013 and 2014, and discuss the changes from 2013 to 2014.