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?

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

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

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.