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PROBLEM 15.16 Financial statement analysis The inventory turnover of A Ltd was 3.79 in 2018...

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Accounting

PROBLEM 15.16 Financial statement analysis The inventory turnover of A Ltd was 3.79 in 2018 and the days inventory on hand 2019 was 140.6.

1 Explain the purpose of calculating the inventory turnover ratio.

1a Explain what an inventory turnover ratio of 3.79 means.

1b Is the 2019 inventory turnover ratio for A Ltd an improvement on the 2018 inventory turnover ratio?

1c What factors should management consider when interpreting these figures?

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