# Garden Fresh Inc. is a wholesaler of fresh fruits and vegetables. Each year, it submits a set of financial ratios to a trade association. Even though the association doesnt publish the individual ratios for each company, the president of Garden Fresh thinks it is important for public relations that his company look as good as possible. Due to the nature

Chapter 13, Decision Cases #8
Garden Fresh Inc. is a wholesaler of fresh fruits and vegetables. Each year, it submits a set of financial ratios to a trade association. Even though the association doesn€™t publish the individual ratios for each company, the president of Garden Fresh thinks it is important for public relations that his company look as good as possible. Due to the nature of the fresh fruits and vegetables business, one of the major ratios tracked by the association is inventory turnover. Garden Fresh€™s inventory stated at FIFO cost was as follows:

Sales revenue for the year ending December 31, 2010, is \$3,690,000. The company€™s gross profit ratio is normally 40%. Based on these data, the president thinks the company should report an inventory turnover ratio of 90 times per year.
Required
1. Using the necessary calculations, explain how the president came up with an inventory turnover ratio of 90 times.
2. Do you think the company should report a turnover ratio of 90 times? If not, explain why you disagree and explain, with calculations, what you think the ratio should be.
3. Assume that you are the controller for Garden Fresh. What will you tell thepresident?

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,...
Financial Ratios
The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that,...