Inventory Turnover Analysis
The following information for Valdez Industries was taken from the company’s financial statements (amounts in thousands):
|
2008 |
2007 |
2006 |
2005 |
Sales |
$24,000 |
$18,000 |
$15,000 |
$12,000 |
Cost of goods sold |
19,600 |
13,900 |
10,200 |
7,200 |
Inventory |
1,400 |
1,200 |
910 |
750 |
Accounts receivable |
3,900 |
3,600 |
4,100 |
3,200 |
Accounts payable |
2,300 |
1,200 |
1,500 |
1,800 |
Net income |
560 |
320 |
510 |
430 |
Instructions:
1. Compute the inventory turnover and the number of days’ sales in inventory for the years 2006–2008. Use average inventory in your calculations.
2. Evaluate Valdez’s inventory turnover trend.