Hi there,
For inventory turnover ratios, I seem to find that there is a discrepancy in the book. Sometimes they refer to it as the cogs/ ending inventory whereas other times, it's cogs/ average inventory.
How do we know which one to use for each problem?作者: Kapie 时间: 2011-7-11 19:05
was this meant for the Level 1 Forum ?
or is this stuff really in Level 2 yet again ?作者: hassan 时间: 2011-7-11 19:05
It really is Level 2 stuff, and given that there is an entire study session devoted to accounting for inventories, cost assumptions, and those cost assumptions affects on ratios in accounting it is material.
My understanding is the "CFAI approved method" for activity ratios is to use the average balance sheet values in the denominator when sufficient information is provided from the item set; and use the most recent single period otherwise. My experience was that for these particular kinds of problems the MC answers were materially different from another that calculating either way would have yielded a close enough answer.
It's a beautiful War.作者: kickthatcfa 时间: 2011-7-11 19:05