Page 290 - F3 -FA Integrated Workbook STUDENT 2018-19

Chapter 20

3.4 Inventory turnover: calculation

Cost of sales
————————

Inventory

 number of times inventory is turned over in the period

 higher turnover = higher efficiency

3.5 Inventory holding period: calculation

Inventory
———————— × 365 days

Cost of sales

 average number of days for which inventory held

 lower days = higher efficiency

3.6 Inventory ratios: reasons for movement

 improvement/deterioration in inventory control

 obsolete inventory

 increased level of inventory e.g. to facilitate marketing and selling campaign

284