Question

The owner of a large machine shop has just finished its financial analysis from the prior fiscal year. Following is an excerpt from the final report:

a. Compute the inventory turnover ratio (ITR).

b. Compute the weeks of supply (WS).

Short answer

Financial analysis is the process of assessing the performance and suitability of firms, projects, budgets, and other financial operations.

Step-by-step solution

Calculations

The calculations are listed below:

Complete Inventory esteem = Value of creation materials available + Value of work-in-measure Inventory + Value of completed products close by

= 42,500 + 67,000 + 27,500

= $137,000

Inventory Turnover Ratio = Cost of Goods Sold/Total Inventory Value

= 305,000/137,000

=2.2

Inventory turnover ratio (ITR)

We can divide the cost of products by the average inventory for the same period to get the inventory turnover ratio.