Inventory Turnover for Caterpillar The following amounts are available from the 2008 annual report of Caterpillar, the maker of machinery and engines for the construction, mining, and forestry industries.

(All amounts are in millions of dollars.)

Cost of goods sold $38,415 Inventories, December 31, 2008 8,781 Inventories, December 31, 2007 7,204 Required 1. Compute Caterpillar’s inventory turnover ratio for 2008.

2. What is the average length of time it takes to sell an item of inventory? Explain your answer.

3. Do you think the average length of time it took Caterpillar to sell inventory in 2008 is reasonable? What other information do you need to fully answer that question?

AppendixLO1