The following information is available for Tim Hortons Inc. and Starbucks Corporation, and their industry, for a
Question:
The following information is available for Tim Hortons Inc. and Starbucks Corporation, and their industry, for a recent year:
Instructions
(a) Comment on the liquidity of the two companies in comparison with each other, and the industry.
(b) Comment on the profitability of the two companies in comparison with each other, and the industry.
Tim Hortons Starbucks Industry Average Inventory turnover Current ratio Gross profit margin Profit margin 24.4 times 1.2:1 376% 10.4% 16.1 1.3:1 11 .996 18.3% 5.3 times 1.9:1 56.3% 10.4%
Step by Step Answer:
a Both companies have current ratios that exceed the industry average and therefore enjoy greater li...View the full answer
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118644942
6th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
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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