Question

Review the following year end financial statement excerpts to answer the question below. Sales Cost of goods sold Gross profit 2041 $ 2,500 1,773 $ 727 2042 $3,000 2.093 $ 907 2043 $3,570 2.467 $ 1,103 Cash Accounts receivable Inventory Other current assets Total current assets $ 100 240 417 S 123 303 461 $ 66 376 547 107 $ 1,096 117 70 $ 874 $ 957 Which of the following best describes the company's inventory over the past three years? Inventory days on hand was stable in 20Y2 and slower in 20Y3. Inventory days on hand improved in 2012 and lengthened slightly in 2013. O Inventory days on hand was stable in all three years. O Inventory days on had improved in all three years.

Answer 1

2 inventory turnover days =inventory/cost of goods sold' 365 year 2011 year 2012 year 2013 6 ivnentory turnover days 85.85 days = 417/1773'365 80.39 days = 461/2093365 80.93 days =547/2467'365 9 10 11 option Bis correct as form the above result it is clearly envisaged that the inveontory holding preriod decreased which is good it is improved in 2012 from 2011 but slightly lenghted in 2013

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