Question

(a) Vertically analyze the financial data (current year only) in Exercise 17-11. (b) Calculate how long it took Keever Inc. to sell its inventory (current year only). Show and briefly explain your work.

EX 17-11 nventory analysis The following data were extracted from the income statement of Keever Inc.: OBJ. 3 r, Sales Beginning inventories Cost of goods sold Ending inventories Current Year $18,500,000 940,000 9,270,000 1,120,000 Previous Year $20,000,000 860,000 10,800,000 940,000

Answer 1

a) Vertical analysis of financial data: (current year):

                                         USD                        Percentage

Sales                           18,500,000                  100%

COGS                             9,270,000                    50%

Gross Margin                  9,230,000                    50%

The vertical analysis shows us that the Gross margin has increased as compared to previous year

b) Day's sale of inventory = Ending inventory   x 365

                                             Cost of goods sold

                                      = 1120,000 / 9270,000 x 365 = 44 days

Keever Inc takes 44 days to sell its inventory