Payless ShoeSource and Dillard?s both offer men?s formal footwear. Payless offers lower- to middle-priced footwear, whereas Dillard?s
Question:
Payless ShoeSource and Dillard?s both offer men?s formal footwear. Payless offers lower- to middle-priced footwear, whereas Dillard?s offers more specialized, higher-end footwear. The average price for a pair of shoes in Payless may be about $50, whereas the average price in Dillard?s may be about $175. The types of shoes offered by Dillard?s are not sold by many other stores. Suppose a Payless store and a Dillard?s store report the following amounts for men?s shoes in the same year (company names are disguised):
Required:1. For Company 1 and Company 2, calculate the inventory turnover ratio.2. For Company 1 and Company 2, calculate the gross profit ratio.3. After comparing the inventory turnover ratios and gross profit ratios, which company do youthink is Payless and which is Dillard?s? Explain.
Inventory Turnover RatioInventory 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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Financial Accounting
ISBN: 978-1259914898
5th edition
Authors: David Spiceland, Wayne M. Thomas, Don Herrmann