Explain How the Inventory Turnover Ratio and the Days' Sales

question 114

Essay

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

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Definitions:

Capital Fund

A reserve of money that is set aside for long-term investment projects or to cover future expenses and liabilities.

Endowment Fund

A fund established to finance a particular purpose of an organization, where the principal is kept intact while the investment income is available for use.

Deferral Method

An accounting technique used to delay the recognition of expenses or revenues until the related cash is paid or received.

Financial Statements

Written records that convey the business activities and the financial performance of a company. They typically include the balance sheet, income statement, and statement of cash flows.