Chocolate Treats Ltd. and Coffee Bars Inc. are both specialty food chains. The two companies reported these
Question:
Requirements
1. Compute the gross profit percentage and the rate of inventory turnover for Chocolate Treats and for Coffee Bars for 2014.
2. Based on these statistics, which company looks more profitable? Why? What other expense category should we consider in evaluating these two companies?
Chocolate Treats Ltd Statement of Operations Fiscal Year Thousands 2014 2013 Revenues: Net sales. $543 $708 Costs and Expenses: Cost of goods sold General and administrative expenses 475 68 598 Chocolate Treats Ltd. Balance Sheet January 31, Thousands Assets Current assets: 2014 2013 $17 27 24 $28 30 29 Cash and cash equivalents Inventories Coffee Bars Inc. Statement of Earnings Fiscal Year Thousands Net sales Cost of goods sold. Selling, general, and administrative expenses 2014 $7,787 3,179 2,948 2013 $6,369 2,605 2,363 Coffee Bars Inc. Balance Sheet Year End Thousands Assets Current assets: 2014 2013 $313 224 636 $174 191 546 Cash and temporary inv estments Inventories
Step by Step Answer:
Req 1 Chocolate Treats Ltd Coffee Bars Inc Thousands Thousands Gross profit percentage ...View the full answer
Financial Accounting
ISBN: 978-0133472264
5th Canadian edition
Authors: Charles Horngren, William Thomas, Walter Harrison, Greg Berberich, Catherine Seguin
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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