A- 10.5 Use the following information relating to Shana Company to calculate the inventory turnover ratio...

A- 10.5 Use the following information relating to Shana Company to calculate the inventory turnover ratio and the number of days’ sales in inventory ratio.

year	sales	cost of sales	average inventory
2021	22000	16500	2400
2022	28000	21000	3000
2023	33000	24750	3500
2024	35000	26250	4000

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Expert Solution

Formula of inventory turnover ratio

Inventory turnover ratio = cost of goods sold/average inventory

calculation of inventory turnover ratio

year 2021 cost of sale = 16500

average inventory = 2400

Inventory turnover ratio = 16500/2400 = 6.88

year 2022 cost of sale = 21000

average inventory = 3000

inventory turnover ratio = 21000/3000 = 7

year 2023 cost of sale = 24750

average inventory = 3500

inventory turnover ratio = 24750/3500 = 7.07

year 2024 cost of sale = 26250

average inventory = 4000

inventory turnover ratio = 26250/4000 = 6.56

number of days sale in inventory ratio = 365/inventory turnover ratio

no of days in a year = 365 days

year 2021 = 365/6.88 = 53.05 days

year 2022 = 365/7 = 52 days

year 2023 = 365/7.07 = 52.63 days

year 2024 = 365/6.56 = 55.62 days

answers are rounded off upto 2 decimal places

ekkarill92 answered 1 year ago

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