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Inventory, turnover ratio and gross profit ratio

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Using the following information, calculate inventory turnover ratio, the average days in inventory and the gross profit ratio for Howard Company for the year ended December 31, 2011 (Rounded to two decimal places.) Explain each concept and show the relevant formula along with the solution.

Sales $225,000

Cost of goods sold $175,000

Ending Inventory, December 31, 2011 $15,275

Ending Inventory December 31, 2010 $18,750

Net Income $36,500

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Solution Summary

This solution contains a step-by-step explanation for how to calculate inventory, turnover ratio and gross profit ratio for the Howard Company, given their figures for sales, cost of goods sold, ending inventory for 2010 and 2011, and net income.

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Inventory turnover ratio - This ratio shows how many times a company's inventory is sold and replaced over a specific period of time and is calculated using the following ...

Solution provided by:
Rachel Kozicki, PhD (IP)
Education
  • BA, Ashford University
  • MBA, Ashford University
  • Post-Master's Certificate, Northcentral University
  • PhD (IP), Northcentral University
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