Chapter 6, Problem 6.4DIR

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 is calculated by using the following formula:

$\left[\text{Inventory turnover =}\frac{\text{Cost of goods sold}}{\text{Average inventory}}\right]$

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.

$\left[\text{Days' sales in inventory =}\frac{\text{Days' in accounting period}}{\text{ Inventory}\text{Turnover}}\right]$

The inventory turnover ratio, and days in inventory for Company C for 2014, and 2015.

To determine

To discuss: The changes in the amount of inventory, the inventory turnover, and days in inventory, and the amount of sales revenue across the two years.