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Refer to the financial statements and Notes to Consolidated Financial Statements for Reitmans (Canada) Limited in Appendix

Question:

Refer to the financial statements and Notes to Consolidated Financial Statements for Reitmans (Canada) Limited in Appendix A.

Instructions

(a) How does Reitmans value its inventory?

(b) Which inventory cost formula does Reitmans use?

(c) Would using the specific identification cost determination method be appropriate for a women's clothing retailer like Reitmans? Explain.

(d) How much did Reitmans record for inventory write downs in fiscal 2012? Was it reported separately on the income statement or included in cost of goods sold? How much did it record for reversals of previous write downs?

(e) For 2012 and 2011, calculate Reitmans' inventory as a percentage of current assets and its cost of sales as a percentage of total revenue. Comment on the results.

(f) Reitmans' inventory turnover and days sales in inventory were calculated for fiscal 2012 in this chapter in Illustrations 6-18 and 6-19, respectively. Calculate these same two ratios for fiscal 2011. Comment on whether Reitmans' management of its inventory improved or weakened in 2012.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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a Inventories are valued at the lower of cost and net realizable value Cost is determined on an aver...View the full answer


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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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