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Calculating the Inventory Turnover ratio

Please help me with this problem.

Prill Co has the following:
Current Assets:.....................year 1...............year 2
Cash and marketable securities 160,000 ....150,000
Accounts receivable, net .......175,000... ....170,000
Inventory ..........................140,000 .............150,000
Total current assets ............475,000 .........470,000
Current Liabilities:
Accounts payable ................150,000 ........140,000
Accrued liabilities ................50,000 .............60,000
Notes payable, short term ......140,000 ......140,000
Total current liabilities ...........340,000 ........340,000

Sales ..........................$5,500,000
Cost of goods sold .........$2,750,000

Required: Calculate the Inventory Turnover ratio.

What does this ratio tell management?

Solution Preview

Prill Co has the following
Current Assets:.....................year 1...............year 2
Cash and marketable securities 160,000 ....150,000
Accounts receivable, net .......175,000... ....170,000
Inventory ..........................140,000 .............150,000
Total current assets ............475,000 .........470,000
Current Liabilities:
Accounts payable ................150,000 ...

Solution Summary

The file computes inventory turnover ratio (and also the meaning) of:

Prill Co has the following
Current Assets:.....................year 1...............year 2
Cash and marketable securities 160,000 ....150,000
Accounts receivable, net .......175,000... ....170,000
Inventory ..........................140,000 .............150,000
Total current assets ............475,000 .........470,000
Current Liabilities:
Accounts payable ................150,000 ........140,000
Accrued liabilities ................50,000 .............60,000
Notes payable, short term ......140,000 ......140,000
Total current liabilities ...........340,000 ........340,000
Sales ..........................$5,500,000
Cost of goods sold .........$2,750,000

$2.19