The following data were extracted from the 2017 financial statements of Penske Automotive Group, Inc. This company operates automobile dealerships, mostly in the United States, Canada, and Western Europe, and commercial truck dealerships in Australia, New Zealand, and the United Kingdom. The company had 355 dealerships as of the end of 2017. Dollar amounts are in millions.

Required

a. Compute Penske’s gross margin percentage for 2017 and 2016.

b. Compute Penske’s average days to sell inventory for 2017 and 2016.

c. How much higher or lower would Penske’s earnings before taxes have been in 2017 if its gross margin percentage had been the same as it was in 2016? Show all supporting computations.

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December 31, 2017 December 31, 2016 Revenue $21,387 $20,119 Cost of sale 18,164 17,152 Gross profit Operating income before taxes Net income 3,223 2,967 548 508 613 342 Ending inventory 3,944 3,408