Decision: Which Inventory to Buy PDF
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Summary
This document discusses the factors businesses need to consider when purchasing inventory. It explains the importance of both accounting information (like cost, storage, profitability) and non-accounting information (product type, storage options, customer preferences). The document also mentions the impact of inventory turnover rates.
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## 9.2 Decision: Which Inventory to Buy When businesses purchase inventories from their suppliers, they have to consider both accounting and non-accounting information. ### Information to Consider when Buying Inventories | Information | |---|---| | **Accounting Information** | cost of inventory...
## 9.2 Decision: Which Inventory to Buy When businesses purchase inventories from their suppliers, they have to consider both accounting and non-accounting information. ### Information to Consider when Buying Inventories | Information | |---|---| | **Accounting Information** | cost of inventory, storage cost, gross profit margin, rate of inventory turnover (times), days sales in inventory (days) | | **Non-Accounting Information** | nature of product, types of storage, customers' preference | ### Accounting Information Accounting information refers to information usually generated by a business' accounting information system, such as the information that can be extracted from the journal, ledger accounts, and financial statements. Accounting information such as the cost of inventory and storage cost affects the total cost of inventory. Rate of inventory turnover (times) informs the business if it has been efficient in managing its inventory. **Connect** Refer to Chapter 16 Financial Statement Analysis for the definition of the financial ratio, rate of inventory turnover (times).
