Financial information for American Eagle is presented in Appendix A at the end of the book, and
Question:
Financial information for American Eagle is presented in Appendix A at the end of the book, and financial information for Buckle is presented in Appendix B at the end of the book.
Required:
1. Which company carries a greater inventory balance as a percentage of total assets?
2. Which company has a higher inventory turnover ratio and therefore lower average days in inventory?
3. Which company’s operations are more profitable using the gross profit ratio?
4. Considering the companies’ ratio of operating expenses to net sales, does your answer to requirement 3 change? Explain.
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,...
Step by Step Answer:
Requirement 1 American Eagles percentage of inventory to total assets is ...View the full answer
Financial Accounting
ISBN: 978-1259914898
5th edition
Authors: David Spiceland, Wayne M. Thomas, Don Herrmann
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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