Costco Wholesale Corporation (COST) and Walmart stores inc. (WMt) compete against each other in general merchandise retailing,
Question:
Costco Wholesale Corporation (COST) and Walmart stores inc. (WMt) compete against each other in general merchandise retailing, gas stations, pharmacies, and optical centers. Below is selected financial information for both companies from a recent year’s financial statements (in millions):
a. Determine for both companies (1) the inventory turnover and (2) the days’ sales in inventory. Round to one decimal place.
b. Compare and interpret the inventory metrics computed in (a).
Costco Walmart Sales $129,025 $500,343 Cost of goods sold Inventory, beginning of period Inventory, end of period 111,882 373,396 8,969 43,046 9,834 43,783
Step by Step Answer:
a 1 2 1 307 111882 365 days 2 1023 373396 365 days The days sales in invento...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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