# Inventory turnover = 17.1 / 2.6

Published: 2022-09-05
 Type of paper:Â Essay Categories:Â Culture Human resources Business Literature Pages: 2 Wordcount: 277 words
143Â views

= 6.577 Means that we are turning over our inventory 6 .58 times a year.

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For 2015,

Average inventory = (2.1 + 2.3) /2 = 2.2

Inventory turnover = 16.8/ 2.2

= 7.64

For 2014,

Average inventory = (1.9 + 2.1) / 2 = 2.0

Inventory turnover = 15.2/2.0

= 7.6

For 2013,Inventory turnover = 13.5/1.7

= 7.94

Cost of materials purchased to cost of finished goods = Cost of materials purchased/ cost of finished goods

For 2016,

Cost of materials purchased to cost of finished goods = 10.6/ 17.7

= 0.599

For 2015,

Cost of materials purchased to cost of finished goods = 8.8/17 = 0.5176

= 0.5176

For 2014,

Cost of materials purchased to cost of finished goods = 7.5/15.4

= 0.4870

For 2013,

Cost of materials purchased to cost of finished goods = 7.1/13.9

= 0.5108

Q2. Change in each ration observed in 2016.

The gross profit percentage changed from 0.22 in 2015 to 0.26 in 2016. This means that the MVF company increased the amount that goes to profit margin per dollar to 26 cents from 22 cents.

The inventory turnover ratio reduced from 7.64 in 2015 to 6.57 in 2016. This shows that the MVF company sold all the goods in their inventory faster in 2016 than they did in 2015, i.e., they turned over their inventory six times in 2016.

The ratio of cost of materials purchased to the cost of finished increased to 0.599 in 2016 from 0.5176 in 2015. This implies that the company produced fewer products concerning the materials used.

Possible causes of each change

The gross profit margin ratio could have been caused by;

Discounts obtained from the purchase of large quantities of raw materials

Large economies of scale that the company could be enjoying.

The increase in inventory turnover could have been caused by;

The use of more efficient distribution criteria.

The increase in demand for the commodities sold by the company.

References

Inventory turnover = 17.1 / 2.6. (2022, Sep 05). Retrieved from https://speedypaper.com/essays/inventory-turnover-171-26

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