requirement 1d. compute the inventory turnover ratios for 2025 and 2024
begin by selecting the formula to compute the inventory turnover ratio.
inventory turnover ratio = cost of goods sold \div average merchandise inventory
now, compute the inventory turnover ratios for 2025 and 2024 (round your answers to two decimal places. x.xx.)

income statement
banfield, inc.
comparative income statement
years ended december 31, 2025 and 2024
| | year 2025 | year 2024 |
| --- | --- | --- |
| net sales revenue | $ 405,000 | $ 430,000 |
| cost of goods sold | 220,000 | 218,000 |
| gross profit | 230,000 | 214,000 |
| operating expense | 138,000 | 136,000 |
| income from operations | 91,000 | 78,000 |
| interest expense | 10,000 | 11,000 |
| income before income tax | 81,000 | 67,000 |
| income tax expense | 14,000 | 17,000 |
| net income | $ 67,000 | $ 50,000 |

balance sheet
current assets:
| | | |
| --- | --- | --- |
| cash | $ 95,000 | $ 82,000 |
| accounts receivable, net | 100,000 | 172,000 | $ 99,000 |
| merchandise inventory | 147,000 | 158,000 | 205,000 |
| prepaid expenses | 21,000 | 6,000 |
| total current assets | 371,000 | 378,000 |
| property, plant, and equipment, net | 217,000 | 176,000 |
| total assets | $ 808,000 | $ 584,000 | $ 540,000 |
liabilities
| | | |
| --- | --- | --- |
| total current liabilities | $ 277,000 | $ 248,000 |
| long - term liabilities | 119,000 | 98,000 |
| total liabilities | 346,000 | 346,000 |
stockholders equity
| | | |
| --- | --- | --- |
| preferred stock, 5% | 90,000 | 90,000 |
| common stockholders equity, no par | 148,000 | 112,000 | $ 91,000 |

Question

requirement 1d. compute the inventory turnover ratios for 2025 and 2024
begin by selecting the formula to compute the inventory turnover ratio.
inventory turnover ratio = cost of goods sold \div average merchandise inventory
now, compute the inventory turnover ratios for 2025 and 2024 (round your answers to two decimal places. x.xx.)

income statement
banfield, inc.
comparative income statement
years ended december 31, 2025 and 2024
| | year 2025 | year 2024 |
| --- | --- | --- |
| net sales revenue | $ 405,000 | $ 430,000 |
| cost of goods sold | 220,000 | 218,000 |
| gross profit | 230,000 | 214,000 |
| operating expense | 138,000 | 136,000 |
| income from operations | 91,000 | 78,000 |
| interest expense | 10,000 | 11,000 |
| income before income tax | 81,000 | 67,000 |
| income tax expense | 14,000 | 17,000 |
| net income | $ 67,000 | $ 50,000 |

balance sheet
current assets:
| | | |
| --- | --- | --- |
| cash | $ 95,000 | $ 82,000 |
| accounts receivable, net | 100,000 | 172,000 | $ 99,000 |
| merchandise inventory | 147,000 | 158,000 | 205,000 |
| prepaid expenses | 21,000 | 6,000 |
| total current assets | 371,000 | 378,000 |
| property, plant, and equipment, net | 217,000 | 176,000 |
| total assets | $ 808,000 | $ 584,000 | $ 540,000 |
liabilities
| | | |
| --- | --- | --- |
| total current liabilities | $ 277,000 | $ 248,000 |
| long - term liabilities | 119,000 | 98,000 |
| total liabilities | 346,000 | 346,000 |
stockholders equity
| | | |
| --- | --- | --- |
| preferred stock, 5% | 90,000 | 90,000 |
| common stockholders equity, no par | 148,000 | 112,000 | $ 91,000 |

Accepted Answer

# Explanation:
## Step1: Recall the formula for inventory turnover ratio
The formula for inventory turnover ratio is $	ext{Inventory Turnover Ratio} = \frac{	ext{Cost of Goods Sold}}{	ext{Average Merchandise Inventory}}$, where $	ext{Average Merchandise Inventory} = \frac{	ext{Beginning Inventory} + 	ext{Ending Inventory}}{2}$.

## Step2: Calculate average merchandise inventory for 2025
For 2025, the beginning inventory is the ending inventory of 2024, which is $158,000$, and the ending inventory of 2025 is $147,000$. So, $	ext{Average Merchandise Inventory (2025)} = \frac{158000 + 147000}{2} = \frac{305000}{2} = 152500$.

## Step3: Calculate inventory turnover ratio for 2025
The cost of goods sold for 2025 is $220,000$. Using the formula, $	ext{Inventory Turnover Ratio (2025)} = \frac{220000}{152500} \approx 1.44$ (rounded to two decimal places).

## Step4: Calculate average merchandise inventory for 2024
For 2024, the beginning inventory is the ending inventory of 2023, which is $205,000$ (from the balance sheet, assuming the previous year's inventory is $205,000$), and the ending inventory of 2024 is $158,000$. Wait, no, looking at the balance sheet, the merchandise inventory for 2024 is $158,000$ and for 2023 (previous year) is $205,000$? Wait, the balance sheet shows merchandise inventory for different years? Wait, the balance sheet has columns with amounts, maybe the first column is 2025, second 2024, third 2023? Let's recheck. The income statement has 2025 and 2024. The balance sheet: Current Assets - Merchandise Inventory: first amount (2025) is $147,000$, second (2024) is $158,000$, third (2023) is $205,000$. So for 2024, the beginning inventory is 2023's ending inventory, which is $205,000$, and ending inventory of 2024 is $158,000$. So $	ext{Average Merchandise Inventory (2024)} = \frac{205000 + 158000}{2} = \frac{363000}{2} = 181500$.

## Step5: Calculate inventory turnover ratio for 2024
The cost of goods sold for 2024 is $218,000$. Using the formula, $	ext{Inventory Turnover Ratio (2024)} = \frac{218000}{181500} \approx 1.20$ (rounded to two decimal places). Wait, but let's check again. Wait, maybe the balance sheet's merchandise inventory: the first column is 2025, second 2024, third 2023. So for 2024, the beginning inventory is 2023's inventory ($205,000$) and ending inventory is 2024's inventory ($158,000$). But let's confirm the cost of goods sold for 2024 is $218,000$ (from income statement). So average inventory for 2024: (205000 + 158000)/2 = 181500. Then 218000 / 181500 ≈ 1.20. Wait, but maybe I made a mistake in the beginning inventory for 2024. Wait, the income statement is for years ended December 31, 2025 and 2024. So for 2024, the inventory at the beginning of 2024 is the inventory at December 31, 2023, which is $205,000$ (from balance sheet, third column), and inventory at December 31, 2024 is $158,000$ (second column). So that's correct.

Wait, but let's recheck the average inventory for 2025: beginning inventory (Dec 31, 2024) is $158,000$, ending inventory (Dec 31, 2025) is $147,000$. So average is (158000 + 147000)/2 = 152500. Cost of goods sold 2025 is 220000. 220000 / 152500 ≈ 1.44.

For 2024: beginning inventory (Dec 31, 2023) is $205,000$, ending inventory (Dec 31, 2024) is $158,000$. Average is (205000 + 158000)/2 = 181500. Cost of goods sold 2024 is 218000. 218000 / 181500 ≈ 1.20.

Wait, but maybe the balance sheet's merchandise inventory for 2024 is $158,000$ and for 2023 is $205,000$, so that's correct.

# Answer:
Inventory turnover ratio for 2025: $\approx 1.44$
Inventory turnover ratio for 2024: $\approx 1.20$

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QUESTION IMAGE

Question

Explanation:

Step1: Recall the formula for inventory turnover ratio

Step2: Calculate average merchandise inventory for 2025

Step3: Calculate inventory turnover ratio for 2025

Step4: Calculate average merchandise inventory for 2024

Step5: Calculate inventory turnover ratio for 2024

Answer:

	year 2025	year 2024
cost of goods sold	220,000	218,000
gross profit	230,000	214,000
operating expense	138,000	136,000
income from operations	91,000	78,000
interest expense	10,000	11,000
income before income tax	81,000	67,000
income tax expense	14,000	17,000
net income	$ 67,000	$ 50,000


accounts receivable, net	100,000	172,000	$ 99,000
merchandise inventory	147,000	158,000	205,000
prepaid expenses	21,000	6,000
total current assets	371,000	378,000
property, plant, and equipment, net	217,000	176,000
total assets	$ 808,000	$ 584,000	$ 540,000


long - term liabilities	119,000	98,000
total liabilities	346,000	346,000