ACCTNG 2400 1st Edition Lecture 19 Outline of Last Lecture I. Inventory methodsII. COGS equationIII. Inventory management Methodsa. Perpetualb. PeriodicOutline of Current Lecture IV. Operating Cycle EfficiencyV. Liquidity ratiosa. Inventory turnover ratiob. Receivable turnover ratioCurrent LectureOperating Cycle EfficiencyThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Liquidity RatiosInventory Turnover Ratio – the inventory turnover ratio indicates how frequently inventory is bought and sold. The “days to sell” indicates the average number of days needed to sell each purchase of inventory.Inventory turnover ratio = Cost of goods sold / average inventoryDays to sell = 365 / inventory turnover ratioReceivable Turnover Ratio – the receivable turnover ratio indicates how frequently credit sales are collected. The “days in receivables” indicates the average number of days needed to collect cash for each credit sale.Receivable turnover ratio = net sales revenue / average net receivablesDays in receivables = 365 / receivable turnover
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