AP$7-15$B $($Inventory turnover$)$ The following information pertains to two competitors, Mostly Inc. and Hardly Ltd$.$

Company

$$

Beginning Inventory

$$

Ending Inventory

$$

Cost of Goods Sold

Mostly Inc.

$$

$$165,000$

$$

$$250,000$

$$

$ $900,000$

Hardly Ltd$.$

$$

$$565,000$

$$

$$590,000$

$$

$$1,750,000$

Mostly Inc. reported sales revenues of $$1,310,000$ and Hardly Ltd$.$ reported sales revenues of $$2,890,000.$

Required

Calculate the inventory turnover and days to sell inventory ratios for Mostly and Hardly.

Calculate the gross margin and gross margin ratio for Mostly and Hardly.

On the basis of inventory turnover, which company is moving its inventory faster? Does that mean the inventory is better managed? Explain.

On the basis of the gross margin ratio, which company is earning a higher profit margin?

Which company do you think is better managed? Explain your answer.

Estimate the capital that Mostly could free up if it were to reduce its days to sell inventory ratio by five days.