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Inventory Turnover

XYZ corporation reports the following data on their IS and BS:

Sales: 1,000,000.00
CoGS: 500,000.00
Gross Margin: 500,000.00
SG&A: 250,000
EBIT: 250,000
Interest: 150,000
EBT: 100,000
Taxes: 30,000
Net Income: 70,000

Balance Sheet (Simplified)

Assets

Inventory: 1,000,000
Other Current Assets: 2,000,000
Long Term Assets: 5,000,000
Total Assets: 8,000,000

Liabilities

Current Liabilities: 2,000,000
Long Term Debt: 3,000,000

Equity

Paid-In Capital: 1,000,000
Retained Earnings: 2,000,000

Total Liabilities and Equity: 8,000,000

In addition, the accounting department reports last years inventory balance was 3,000,000

Now the questions:

What are the inventory turns for the firm?
If the average turns in this same industry is 4x, is XYZ better or worse then average?

What must be done to improve inventory turns?

Solution Preview

Now the questions:

What are the inventory turns for the firm?
If the average turns in this same industry is 4x, is XYZ better or worse then average?

What must be done to improve inventory turns?

Inventory Turnover = ...

Solution Summary

Response discusses the steps to compute the Inventory Turnover

$2.19