Inventory Turnover Field Company reported total inventory at January 1 and December 31, 2000, of $200,000 and
Question:
Inventory Turnover Field Company reported total inventory at January 1 and December 31, 2000, of
$200,000 and $160,000, respectively. Cost of goods sold for 2000 was $470,000. Field’s nearest competitor reported inventories of $350,000 and $400,000 at January 1 and December 31, 2000, respectively, and reported cost of goods sold of
$900,000 for 2000. Total 2000 sales for Field Company and its competitor were $600,000 and $1,250,000, respectively.
a. Compute the inventory turnover ratios for the two companies for 2000.
b. Compute the gross profit percentage (gross profit divided by sales) for the two companies for 2000.
c. On the basis of inventory turnover, which company is superior?
d. On the basis of gross profit percentage, which company is superior?
e. Which company would you recommend as best managed?
Indicate why.
Step by Step Answer:
Financial Accounting A Decision Making Approach
ISBN: 9780471328230
2nd Edition
Authors: Thomas E. King, Valdean C. Lembke, John H. Smith