SUPERVALU reported the following data in its annual report. (a) Compute SUPERVALUs inventory turnover ratios for 2009
Question:
SUPERVALU reported the following data in its annual report.
(a) Compute SUPERVALU’s inventory turnover ratios for 2009 and 2010, using:
(1) Cost of sales and LIFO inventory.
(2) Cost of sales and FIFO inventory.
(b) Some firms calculate inventory turnover using sales rather than cost of goods sold in the numerator. Calculate SUPERVALU’s 2009 and 2010 turnover, using:
(1) Sales and LIFO inventory.
(2) Sales and FIFO inventory.
(c) Describe the method that SUPERVALU’s appears to use.
(d) State which method you would choose to evaluate SUPERVALU’s performance. Justify your choice.
Step by Step Answer:
a1 Inventory turnover using LIFO2009 34451 2709 127 times2010 31444 2342 134 times 2 ...View the full answer
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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