Inventory Turnover Analysis
The following information for Valdez Industries was taken from the company's financial statements (amounts in thousands):
|
|
2008
|
2007
|
2006
|
2005
|
|
Sales
|
$24,000
|
$18,000
|
$15,000
|
$12,000
|
|
Cost of goods sold
|
19,600
|
13,900
|
10,200
|
7,200
|
|
Inventory
|
1,400
|
1,200
|
910
|
750
|
|
Accounts receivable
|
3,900
|
3,600
|
4,100
|
3,200
|
|
Accounts payable
|
2,300
|
1,200
|
1,500
|
1,800
|
|
Net income
|
560
|
320
|
510
|
430
|
Instructions:
1. Compute the inventory turnover and the number of days' sales in inventory for the years 2006-2008. Use average inventory in your calculations.
2. Evaluate Valdez's inventory turnover trend.