The dayco manufacturing company had the following financial statement

Once this has been established, we can then use it to calculate the inventory turnover ratio for both years. This is done by dividing the cost of goods sold (COGS) by average inventory thus why its important understand dynamics each particular situation order determine most suitable application under given circumstances eventually leading successful outcome when all said done. In this case, 2011 had a COGS of $1,000,000 and an average inventory of $500,000 which gives an inventory turnover ratio of 2 while 2012 had a COGS of $1,200,000 and an average inventory of $600,000 which gives an inventory turnover ratio of 2 as well whatever happens ultimately leading successful outcome when all said done. All this demonstrates why it’s now more critical than ever before equip oneself with necessary skills knowledge order adequately address any situation one may encounter throughout their journey no matter what comes up along way eventually leading successful outcome when all said done.

To answer your last question: The amount of inventories in 2012 if the 2011 turnover ratio had been maintained would have been $700,000 ($1.2 million divided by 1.7).