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Identify two trends in the ratios during the time period

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Reference no: EM132801324

Question - You are provided the following information about your audit client. All dollar amounts are in millions.

 

2019

2018

2017

Sales

$92.8

$86.8

$69.6

Cost of Sales

68.9

67.2

54.0

Begin Inventory

9.2

8.4

6.0

Ending Inventory

11.2

9.2

7.6

1. Calculate the following two ratios for 2019, 2018, and 2017.

Gross margin as a percentage of sales = (Sales - Cost of Sales)/Sales

Inventory turnover = Cost of Sales/Average Inventory

2. From your calculations, identify two trends in the ratios during the time period.

3. Industry average for inventory turnover for the client's industry is 10.0. Incorporating this additional information, analyze and briefly identify your audit concerns regarding the inventory account of your client.

Reference no: EM132801324

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