Sweet Treats, Inc., and Coffee Time Corporation are both specialty food chains. The two companies reported these
Question:
Sweet Treats, Inc., and Coffee Time Corporation 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 Sweet Treats, Inc., and Coffee Time Corporation for 2014.
2. Based on these statistics, which company looks more profitable? Why? What other expense category should we consider in evaluating these twocompanies?
A1 Sweet Treats, Inc. Income Statements (Adapted) Years Ended December 31 2 Amounts in millions) 2014 2013 Revenues Net sales Costs and Expenses: Cost of oods sold Selling, general, and administrative exoenses 474 592 A1 Sweet Treats, Inc. Balance Sheets (Adapted) December 31 2014 ) (Amounts in millions Current assets: Recehables 2013 Assets Cash and cash equivalents 61 26 7Inventories 20 36 Al Coffee Time Corporation Income Statements (Adapted) Years Ended December 31 2 (Amounts in millions) 2014 2013 Net sales 7,777 180 6,369 600 ,000 2,350 Cost of goods sold Selling, general, and administrative expenses A1 Coffee Time Corporatlon Balance Sheets (Adapted December 31 2 (Amounts in millions 2014 2013 Assets Current assets Cash and term Receivables, net 318 227 625 nvestments 194 541 7Inventories
Step by Step Answer:
Req 1 Req 2 These statistics are unclear The numbers suggest t...View the full answer
Financial Accounting
ISBN: 978-0133427530
10th edition
Authors: Walter Harrison, Charles Horngren, William 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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