Albertson’s reported that its inventory turnover ratio increased

Albertson’s reported that its inventory turnover ratio increased from 8.2 times in 2003 to 8.4 times in 2004. The following data appear in Albertson’s annual report.

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(a) Compute Albertson’s inventory turnover ratios for 2003 and 2004, 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 Albertson’s 2003 and 2004 turnover, using:

(1) Sales and LIFO inventory.

(2) Sales and FIFO inventory.

(c) Describe the method that Albertson’s appears to use.

(d) State which method you would choose to evaluate Albertson’s performance. Justify your choice.

Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally.    Inventory Turnover Ratio FormulaWhere,...


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