A measure useful in evaluating the efficiency in managing inventories is:
What are your choices? What is your answer?
inventory turnover.
average days to sell inventory.
Both (a) and (b).
None of the above.
my answer I think it is average days to sell inventory??
This web site disagrees.
http://suite101.com/article/inventory-analysis-a79403
the answer was both a and b
Right.
One measure that is useful in evaluating the efficiency in managing inventories is the inventory turnover ratio. This ratio shows how many times a company's inventory is sold and replaced within a specific period, typically within a year. It measures how efficiently a company's inventory is being managed and how quickly it is being converted into sales.
To calculate the inventory turnover ratio, you need two pieces of information: the cost of goods sold (COGS) and the average inventory level. COGS represents the total cost of producing or acquiring the products that were sold during the specified period. The average inventory level is calculated by adding the beginning and ending inventory levels for the specified period and dividing by two.
Once you have these values, you can calculate the inventory turnover ratio using the following formula:
Inventory Turnover Ratio = COGS / Average Inventory Level
A high inventory turnover ratio indicates efficient inventory management, as it suggests that the company is selling its products quickly and keeping inventory levels low. On the other hand, a low ratio may indicate poor inventory management, as it implies slow sales and/or excessive inventory levels.
By comparing the inventory turnover ratio over time or benchmarking it against industry averages, you can assess the effectiveness of a company's inventory management practices. This measure can provide valuable insights into the company's operational efficiency, profitability, and cash flow management.