
Concept explainers
Requirement 1 (a);
To calculate:
Inventory turnover ratio for the Samsung, Apple and Google Company.
Requirement 1 (a);

Answer to Problem 9BTN
Solution:
1. Inventory turnover for Samsung company;
2. Inventory turnover for Apple Company;
3. Inventory turnover for Google Company;
Explanation of Solution
Thus above made inventory turnover ratio for Apple and Google companies
Requirement 1 (b);
To calculate:
Days’ sales in inventory for the Samsung, Apple and Google company..
Requirement 1 (b);

Answer to Problem 9BTN
Solution:
Explanation of Solution
Thus above calculated are the days’ in sales for each company.
Requirement 2;
To analyse:
Analysis and interpretation of inventory turnover ratio ** days’ in sales in inventory
Requirement 2;

Answer to Problem 9BTN
Solution:
Inventory turnover ratio of Samsung Company has declined from prior year which means operational efficiency of Samsung company has been declined. When we see performance of apple and Google companies then same trend can be seen because inventory turnover ratio of Apple and Google companies also has been declined in current year in compare to last year.
So we can say that capacity of converting inventory into sales has been declined in current year for all three companies due to decreased inventory turnover ratio.
For Samsung company days’ sales in inventory have been decreased in current year which is good symbol because lower the days better it is. But in case of Apple and Google company we see that days’ sales in inventory has been increased in current year which is not a good symbol because higher days’ sales in inventory means a company is not more efficient in selling its inventory.
Explanation of Solution
First of all let’s combine results of inventory turnover and days’ sales in inventory together to better analysis;
Inventory turnover ratio | Days’ sales in inventory | |||
Current year | One year prior | Current year | One year prior | |
Samsung company | 7.47 times | 7.57 times | 50.72 days | 51.15 days |
Apple company | 83.45 times | 112.12 times | 6.04 days | 3.29 days |
Google company | 55.55 times | 76.42 times | 6.01 days | 8.93 days |
So on the basis of above given figures it is clear that inventory turnover ratio of Samsung company have declined from prior year which means operational efficiency of Samsung company has been declined. When we see performance of apple and Google companies then same trend can be seen because inventory turnover ratio of Apple and Google companies also has been declined in current year in compare to last year.
So we can say that capacity of converting inventory into sales has been declined in current year for all three companies due to decreased inventory turnover ratio.
As we know that low numbers of Days’ sales in inventory are better indicator of efficient selling process for a company. So on the basis of this rule we can say that for Samsung company it has been slightly improved because Days’ sales in inventory has been decreased in current year but in case of Apple and Google company we see that days’ sales in inventory has been increased in current year which is not a good symbol because higher days’ sales in inventory means a company is not more efficient in selling its inventory.
Thus above given is the analysis and interpretation of inventory turnover ratio & days’ in sales in inventory.
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Chapter 6 Solutions
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