Perez Corporation has the following financial data for the years 20X1 and 20X2:

Question

Perez Corporation has the following financial data for the years 20X1 and 20X2: 20X1 20X2 Sales $ 8,000,000 $ 10,000,000 Cost of goods sold 6,000,000 9,000,000 Inventory 800,000 1,000,000 a. Compute the inventory turnover for each year using the formula Sales/Inventory. (Round your answers to 2 decimal places.) b. Compute inventory turnover based on an alternative calculation that is used by many financial analysts, Cost of goods sold/Inventory, for each year. (Round your answers to 2 decimal places.)

Explanation / Answer

a. 20X1:

Inventory turnover = Sales / Inventory = $8,000,000 / $800,000= 10

20X2:

Inventory turnover = Sales / Inventory = $10,000,000 /1,000,000 = 10

b)

20X1:

Inventory turnover =cost of goods sold/ Inventory = $6,000,000 / $800,000= 7.5

20X2:

Inventory turnover = cost of goods sold / Inventory = $9,000,000 /1,000,000 = 9

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