Asked by Greyson Grubb on May 12, 2024
Verified
Cutting Edge Technologies reported the following information in its 2019 annual report:
1.Determine the inventory turnover ratio.(Round your answer to two decimal places. )
2.Determine the average days to sell inventory.(Round your answer to a whole number. )
3.Explain the meaning of each ratio.
Inventory Turnover Ratio
A financial metric indicating the number of times a company's inventory is sold and replaced over a specific period.
Average Days
A term that could refer to various average time periods calculated in business contexts, such as average days in inventory, but needs more specificity to define accurately.
Annual Report
A comprehensive document detailing a company's activities and financial performance throughout a given year.
- Calculate and interpret key inventory ratios and their implications on company performance.
Verified Answer
2.56 days, (365 days/6.50).
3.The inventory turnover ratio identifies how many times the inventory was sold or liquidated during the year's time while the average days to sell shows the volume of sales that can be supported in terms of number of days' stock on hand.As the inventory turnover increases,the company will carry less stock in terms of days' sales.
Learning Objectives
- Calculate and interpret key inventory ratios and their implications on company performance.
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