Mr
Subject:FinancePrice: Bought3
Mr. Wiley just became aware of the different valuation methods for inventories. He has asked his accountant to calculate the following ratios using different valuation methods:
LIFO FIFO WAC
Inventory Turnover Ratio 4.36 4.32 4.29
Number of Days to be Sold 83.8 84.5 85.1
Gross Profit to Sales Ratio 58% 58% 58%
Cost of Goods Sold to Net Sales Ratio 42% 42% 42%
Current Ratio 3.88 3.92 3.94
Required:
a) Comment on the ratios calculated above and suggest to Mr. Wiley which would be the best measurement method for the valuation of inventories. Give reasons for your answer.
