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Obtain Nestls 2017 annual report using the Investor Relations portion of its web site (do a Web

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Obtain Nestlé’s 2017 annual report using the “Investor Relations” portion of its web site (do a Web search for Nestlé investor relations).


Required:
1. Which inventory method does Nestlé use? Why doesn’t Nestlé use LIFO?
2. Describe the composition of Nestlé’s inventory.
3. Assume Nestlé’s 2015 ending inventory was CHF 8,153 million. Compute the inventory turnover for 2016 and 2017. What is your evaluation of the difference? (Round your answer to two decimal places.)

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...
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1 Nestl uses FIFO for raw materials inventory and purchased finished goods inventory All other inven...View the full answer


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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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