The following information (in $ millions) was taken from the annual reports of two companies. Required a.
Question:
The following information (in $ millions) was taken from the annual reports of two companies.
Required
a. Calculate each company’s inventory turnover and average days to sell inventory.
b. The two companies are Safeway, Inc., a food and drug retailer, and Caterpillar, Inc., a manufacturer of heavy construction equipment. Which of these two companies is Company A? Which is Company B? How did you arrive at each company’s identity?
Company A Company B $43,563.5 Cost of goods sold Average inventory $31,049.0 $ 9,316.0 $ 4,442.6
Step by Step Answer:
a Company A Company B Inventory turnover 310499316 33 times 4...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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