Question

How does the Inventory Turnover rate of a company provide information about its short term liquidity?

How does the Inventory Turnover rate of a company provide information about its short term liquidity?
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer : Inventory Turnover rate

  • Liquidity ratios provide information about the liquidity of company. It shows how the company meet it's short term financial obligation.
  • Liquidity ratios help financial managers to manage company's assets more efficiently.
  • Inventory turnover shows quickly company is selling its inventory.
  • If company's Inventory turnover is high it means company is generating more cash and debtors and company's fund allocation is optimal.
  • High Inventory turnover shows comapny's sales is high and low amount of inventory of sales.
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Why do bondholders prefer short-term maturities to the long-term ones? What explanation does Liquidity Premium Theory...
Why do bondholders prefer short-term maturities to the long-term ones? What explanation does Liquidity Premium Theory offer?
Suppose short-term traders dominate the Treasury markets, that there are liquidity premiums, and that the markets...
Suppose short-term traders dominate the Treasury markets, that there are liquidity premiums, and that the markets expect the rate of inflation to fall over the next few years. On the basis of only this information, for today’s current yield curve which statement is the most accurate? 1. It is possible that short-term rates roughly equal long-term rates 2. The yield curve can be convex but not concave 3. Current long-term rates should definitely exceed current short-term rates 4. Current short-term...
Calculating the Average Inventory, the Inventory Turnover Ratio, and the Inventory Turnover in Days Last year,...
Calculating the Average Inventory, the Inventory Turnover Ratio, and the Inventory Turnover in Days Last year, Nikkola Company had net sales of $2,299,500,000 and cost of goods sold of $1,755,000,000. Nikkola had the following balances: January 1 December 31 Accounts receivable $142,650,000 $172,350,000 Inventory     54,374,200     62,625,800 Required: Note: Round answers to one decimal place. Assume 365 days per year. 1. Calculate the average inventory. $ 2. Calculate the inventory turnover ratio. times 3. Calculate the inventory turnover in days. days...
Liquidity Ratios: - Working Capital: $234,379 - Current Ratio: 1.34 - Inventory Turnover: 13.88 times Solvency...
Liquidity Ratios: - Working Capital: $234,379 - Current Ratio: 1.34 - Inventory Turnover: 13.88 times Solvency Ratios: - Debt to Asset Ratio: 75% - Times Interest Earned: 2656 Profitability Ratios: - Gross Profit Rate: 50% - Profit Margin: 17.7% What accounting recommendations do you have for the new company? What business recommendations do you have to help the new company?
eBook Show Me How Calculator Print Item Calculating the Average Inventory, the Inventory Turnover Ratio, and...
eBook Show Me How Calculator Print Item Calculating the Average Inventory, the Inventory Turnover Ratio, and the Inventory Turnover in Days Last year, Dogwood Company had net sales of $9,375,000 and cost of goods sold of $4,760,000. Dogwood had the following balances: January 1 December 31 Accounts receivable $725,000 $775,000 Inventory 450,000 425,000 Required: Note: Round answers to one decimal place. Assume 365 days per year. 1. Calculate the average inventory. $ 2. Calculate the inventory turnover ratio. times 3....
Tire City has an inventory turnover rate of 8.5, a receivables turnover rate of 12.2, and...
Tire City has an inventory turnover rate of 8.5, a receivables turnover rate of 12.2, and a payables turnover rate of 11.4. How long is the operating cycle? 81.19 days 72.86 days 88.73 days 66.87 days 61.30 days
Working Capital and Short-Term Firm Liquidity Ratios Favor Company has a current ratio of 2.08 (2.08:1)...
Working Capital and Short-Term Firm Liquidity Ratios Favor Company has a current ratio of 2.08 (2.08:1) on December 31. On that date its current assets are as follows: Cash and cash equivalents $28,000 Short-term investments 87,000 Accounts receivable (net) 125,000 Inventory 258,500 Prepaid expenses 9,980 Current assets $508,480 Favor Company's current liabilities at the beginning of the year were $192,000 and during the year its operating activities provided a cash flow of $38,830. a. What are the firm's current liabilities...
Working Capital and Short Term Liquidity Ratios Bell Company has a current ratio of 2.85 (2.85:1)...
Working Capital and Short Term Liquidity Ratios Bell Company has a current ratio of 2.85 (2.85:1) on December 31. On that date the company's current assets are as follows: Cash $30,400 Short-term investments 49,000 Accounts receivable (net) 171,000 Inventory 200,000 Prepaid expenses 11,600 Current assets $462,000 Bell Company's current liabilities at the beginning of the year were $138,000 and during the year its operating activities provided a cash flow of $50,000. a. What are the firm's current liabilities on December...
Exercise 5-13 Inventory turnover and days' sales in inventory LO A3 The following is information for...
Exercise 5-13 Inventory turnover and days' sales in inventory LO A3 The following is information for Palmer Co. Year 3 Year 2 Year 1 Cost of goods sold $ 593,825 $ 376,650 $ 341,300 Ending inventory 101,400 91,750 96,500    Use the above information to compute inventory turnover for Year 3 and Year 2, and its days' sales in inventory at December 31, Year 3 and Year 2
Is equity financing a short-term or a long-term financing option? How does it work?
Is equity financing a short-term or a long-term financing option? How does it work?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT