Analysis of a company's financial statements: Below are simplified versions of the balance sheet and income statement for Toys b

Question

3 years ago

5

Analysis of a company's financial statements: Below are simplified versions of the balance sheet and income statement for Toys b

y Tom, Inc. Use this information to answer the following question. A 15% increase in inventory turns for Toys by Tom, Inc. would bring this ratio to ____, suggesting ________ in ________.

Business

1 answer:

nlexa [21] · Answer 1 · 2022-03-04T11:04:14+03:00

Answer: 3.9 times; an improvement; efficiency

Explanation:

Inventory turns is calculated by the formula:

= COGS / Inventory

= 8.4 / 2.50

= 3.36

Increased by 15%:

= 3.36 * (1 + 15%)

= ‭3.864‬

= 3.9 times

Inventory turns is used to show how often the inventory was sold in a period. A higher ratio therefore presents increased efficiency and is desired.