Choice Foods is a large food and drug retailer with more than 1,700 stores in the United
Question:
Choice Foods is a large food and drug retailer with more than 1,700 stores in the United States and Canada. The following financial information relates to fiscal 2021 and 2020:
Required
Calculate inventory turnover and days’ sales in inventory. Is Choice Foods performing better or worse than last year? Why?
(in millions) 2021 2020 Sales $42,286.00 $40,185.00 Cost of goods sold 30,133.10 28,604.00 Receivables 577.90 461.20 Merchandise inventory 2,797.80 2,642.50
Step by Step Answer:
2021 2020 Inventory turnover 301331 27978 1077 286040 26425 1082 Days sales in ...View the full answer
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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