Pastry People and Coffee Grind are both specialty food chains. The two companies reported these figures, in
Question:
Pastry People and Coffee Grind are both specialty food chains. The two companies reported these figures, in millions:
Requirements
1. Compute the gross profit percentage and the rate of inventory turnover for Pastry People and Coffee Grind for 2010.
2. Based on these statistics, which company looks more profitable? Why? What other expense category should we consider in evaluating these twocompanies?
Pastry People, Inc. Income Statement (Adapted) Years Ended December 31 (Amounts in millions) 2010 2009 Revenues: Net sales $548 $701 Costs and Expenses: Cost of goods sold Selling, general, and administrative exper 477 61 593 51 Pastry People, Inc. Balance Sheet (Adapted) December 31 (Amounts in millions) 2010 2009 Assets Current assets: Cash and cash equivalens$17 $22 Receivable Inventories 21 17 34 Coffee Grind Corporation Income Statement (Adapted) Years Ended December 31 (Amounts in millions) 2010 2009 Net sales Cost of goods sold. Selling, general, and administrative expenses9 $7,171 $6,369 3,1902,603 2,360 Coffee Grind Corporation Balance Sheet (Adapted) December 31 Amounts in millions) 2010 2009 Assets Current assets: Cash and temporary investments$310 $171 Receivables, Inventories 227 631 193 546
Step by Step Answer:
Req 1 Pastry People Inc Coffee Grind Corp Dollars in Millions G...View the full answer
Financial accounting
ISBN: 978-0136108863
8th Edition
Authors: Walter T. Harrison, Charles T. Horngren, William Bill Thomas
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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