1. Explain the basic concept underlying all turnover ratios. Why is it advisable in computing a turnover ratio to use an average in the denominator (for example, average inventory)? 2. Sanders...

1. Explain the basic concept underlying all turnover ratios. Why is it advisable in computing a turnover ratio to use an average in the denominator (for example, average inventory)?

2. Sanders Company’s accounts receivable turned over nine times during the year. The credit department extends terms of 2/10, n/30. Does the turnover ratio indicate any problems that management should investigate? Explain.