Access the 2010 annual report for Safeway Inc. by clicking on the Investors and Financial Reports links at www.safeway.com.
a. Examine the company's income statement and balance sheet and conduct horizontal and vertical analyses of the company's cost of goods sold and inventory balances. Round percentages to one decimal point (i.e., 4.8%).
b. Examine the company's merchandise inventories note to its financial statements. What inventory costing method(s) does the company use to account for its inventory? How often does the company take a physical count of its inventory? Does the company follow the lower-of-cost-or-market rule?
c. Using the LIFO reserve disclosed on the balance sheet and assuming a 35% marginal income tax rate, determine how much in taxes the company has deferred at the end of 2010.
d. Calculate the inventory turnover and days in inventory ratios for 2010.
e. Based on your answers above, write a paragraph explaining your opinion of Safeway's inventory position. Use your answers as supporting facts.