Payless ShoeSource and Dillard€™s both offer men€™s formal footwear. Payless offers lower-to middle-priced footwear, whereas Dillard€™s offers more specialized, higher-end footwear. The average price for a pair of shoes in Payless may be about $50, whereas the average price in Dillard€™s may be about $175. The types of shoes offered by Dillard€™s are not sold by many other stores. Suppose a Payless store and a Dillard€™s store report the following amounts for men€™s shoes in the same year (company names are disguised):

Required:
1. For Company 1 and Company 2, calculate the inventory turnover ratio.
2. For Company 1 and Company 2, calculate the gross profit ratio.
3. After comparing the inventory turnover ratios and gross profit ratios, which company do you think is Payless and which is Dillard€™s? Explain.

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Net sales Cost of goods sold Gross profit Average inventory Company1 $200,000 130,000 s 70,000 35,000 Company 2 S200,000 165,000 S 35,000 20,000