Muffin Mania, Inc., and La Crème Coffee Corporation are both specialty food chains. The two companies reported
Question:
Requirements
1. Compute the gross profit percentage and the rate of inventory turnover for Muffin Mania and La Crème Coffee for 2012.
2. Based on these statistics, which company looks more profitable? Why? What other expense category should we consider in evaluating these twocompanies?
Muffin Mania, Inc. Income Statements (Adapted) Years Ended December 31 2012 2011 (Amounts in millions) Revcnucs Net sales S540 $705 Costs and Expenses: Cost of goods sold Selling, general, and administrative expenses 470 61 595 53 Mutfin Mania. Inc. Balance Sheets (Adapted) December 31 (Amounts in millions) 20122011 Assets Current assets: Cash and temporary investments Receivables luventories $21 25 18 $24 40 30 La Crème Coffee Corporation Income Statements (Adapted) Years Ended December 31 (Amounts in millions) Net sales Cost of goods sold Selling, general, and administrative expenses 2012 2011 $7,710 $6,400 3,1702,600 2,975 2,360 La Crème Coffee Corporation Balance Sheets (Adapted) December 31 (Amounts in millions) 20122011 Assets Current assets: Cash and temporary investments Receivables, net Inventories 5320 $175 220 195 630 540
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Req 1 Muffin Mania Inc La Crme Coffee Corp Millions Millions G...View the full answer
Financial accounting
ISBN: 978-0132751124
9th edition
Authors: Walter T. Harrison Jr., Charles T. Horngren, C. William Thom
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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