Answer:
Inventory turnover
Year 3 6.95 times
Year 2 4.73 times
Year 1 4.23 times
Days Sales In Inventory
Year 3 55.22 days
Year 2 75.07 days
Year 1 86.28 days
Explanation:
Inventory turnover is the ratio that how many time a business has sold or replaced the inventory during a given period. A business is considered more profitable if it has high inventory turnover.
According to given data
Year 3 Year 2 Year 1
Merchandise inventory 97,400 87,750 92,500
Cost of goods sold $643,825 $426,650 $391,300
Inventory turnover = Cost of Goods Sold / Average Inventory value
Inventory turnover= Cost of Goods Sold / [ ( Opening Inventory + Closing Inventory ) / 2 ]
Year 3
Inventory Turnover = $643,825 / [ ( 97400 + 87750 ) / 2 ] = 6.95
Year 2
Inventory Turnover = $426,650 / [ ( 87750 + 92500 ) / 2 ] = 4.73
Year 1
Inventory Turnover = $391,300 / 92500 = 4.23
As there will be no Beginning inventory so average inventory will be same as the closing inventory is the same as the Closing Inventory.
Days Sales In Inventory = 365 x Ending Inventory / Cost of Goods Sold
Year 3
Days Sales In Inventory = 365 x 97,400 / $643,825 = 55.22 days
Year 2
Days Sales In Inventory = 365 x 87,750 / $426,650 = 75.07 days
Year 1
Days Sales In Inventory = 365 x 92,500 / $391,300 = 86.28 days
