Solution-Calculate its inventory turnover

Calculate its inventory turnover

Reference no: EM133109826

Question - Rose Enterprise (RE) uses a periodic inventory system and has just completed a physical inventory count for the financial year ended 31 December 2020. Some selected items for the last three financial years are as follows:

	2018	2019	2020
	$	$	$
Pre-tax income	140,000	150,000	40,000
Ending inventory	15,000	25,000	75,000
Cost of goods sold	300,000	350,000	400,000
Accounts payable	26,000	36,000	46,000

Required -

(i) RE's cost of sales has remained steady but its inventory has increased considerably over the last two years. What does this information tell you about the company's inventory turnover? Calculate its inventory turnover and explain your answer.

(ii) RE purchases its inventory on terms "net 25 days". Evaluate and comment whether RE has any potential cashflow problem in 2020.

Reference no: EM133109826

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Calculate its inventory turnover

Reference no: EM133109826

Reference no: EM133109826

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