Doubt from Reading "Working Capital Management" instead, through, reading

kim226

Hi all,

I was going through the end of reading questions from Reading 48 i.e. "Working Capital Management"

In Questions 2 & 3, for the calculation of Inventory turnover, just the Inventory Ending Balance has been considered instead of the Average Inventory i.e. (Beginning Balance + Ending Balance) / 2

Isn't this incorrect?

liquidity

Hi Manankhan,

In the question both Beginning Inventory Balance and Ending Inventory Balance was given, so I was just wondering on why the calculation was done that way.

Iginla2010

yes this is correct .
inventory turnover might be calculated using formula prescribed above because the information in the question would be limited ( avg inventory could not be calculated ), so in scenario when the information is limited , you can calculate use the formula given above . else vice versa( if complete information provided you have to take avg inventory for calculating Inventory turnover)
Cheers

OmarAdnan

yes this is correct .
inventory turnover might be calculated using formula prescribed above because the information in the question would be limited ( avg inventory could not be calculated ), so in scenario when the information is limited , you can calculate use the formula given above . else vice versa( if complete information provided you have to take avg inventory for calculating Inventory turnover)
Cheers