Computing and interpreting inventory turnover

Inventory turnover measures how productively a company uses its merchandise inventory to generate sales and profits. Calculating inventory turnover Here is the formula for inventory turnover: Inventory turnover = Cost of goods sold⁄Average inventory Cost of goods sold measures the amount paid to purchase or manufacture items that were sold during the period. To find cost […]
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Accounting for merchandise inventory

Inventory, also called merchandise inventory, is the company’s investment in products that it plans to sell to customers. It is an asset recorded on the balance sheet along with other current assets. Manufacturers make their own inventory, while retailers and other businesses buy their inventory from suppliers. Recording inventory Under U.S. Generally Accepted Accounting Principles, companies usually […]
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