Question

Identify and describe the ratio that can be used to analyze a company's inventory. What does...

Identify and describe the ratio that can be used to analyze a company's inventory.

What does the ratio measure? What are the components of the ratio? How is the ratio computed?

How does a company know if the results of the calculation are helping or hurting the company's financial health?

Given the following information, calculate the inventory turnover for Lincoln Company, a large grocery store chain. Evaluate the trend results.

2014: Cost of goods sold—$1,043,000; Beginning inventory—$283,000; Ending inventory—$264,000.

2013: Cost of goods sold—$820,000; Beginning inventory—$311,000; Ending inventory—$283,000.

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