Inventory Turnover Analysis

Prior to beginning work on this discussion forum, read Chapter 5 in the course textbook, Using Financial Accounting Information: The Alternative to Debits and Credits.

You may consider using the same company and annual reports that you chose in your Week 1 – Discussion Forum, (The company that was used was “BP”). Reading and Using the Annual Report Case Study. This choice will only work if the company generates the bulk of its revenue from the sale of goods and maintains inventory. If not, then you will need to select another company for this analysis. Choose a company that a fellow student has not already posted.

Address the following:

  • Calculate the inventory turnover ratio and number of days’ sales in inventory for the company for the latest two years. Obtain the industry averages for these ratios and any other pertinent information from the Mergent Online database, available through the University Library, or another outside resource of your choice, and analyze the results.
  • Discuss what each of these ratios tells you about the company’s efficiency in managing its inventory, and how they compare to the industry average.
  • Identify the major causes of any changes in these ratios, and discuss your assessment of the company based on these changes.
  • If you are an investor, explain whether or not you are satisfied with the company’s inventory management.

Your initial response should be a minimum of 200 words.

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