Question

How exactly should I word this? Please read the instructions below. The ratios are already calculated, I just have to explain my reasonings.

Ratio Name: Inventory Turnover Ratio Formula: Cost of Goods Sold Average Inventory Walmart 8.3 times Target Rames Result: 1Compute ratio for both Target and Walmart. Explain/define each ratio using complete sentences. What is the ratio telling you? 12 Compare the ratio for Target and Walmart. Interpret the results for each company in complete sentences. Indicate which company has the most favorable results

Answer 1

Inventory turnover ratio should indicate how effectively company manages its inventory.

In simple word, it shows as How many times average inventory Is sold during accounting period.

Higher inventory turnover ratio show company has better efficiency in inventory management.

This ratio also indicates how company can convert its inventory into cash.

From above ratio,

Target company sold 6.4 times of its average inventory during period.

Walmart company sold 8.3 times of its average inventory during period.

Inventory turnover ratio of Walmart is higher than Inventory turnover ratio of target company. In simple word, Walmart company has better efficiency in inventory management.

Walmart company is easily converting its inventory into cash compare to Target company.

Walmart company has most favorable result.