Continuing Company AnalysisAmazon: Inventory turnover and Number of days' sales in inventory

Amazon.com, Inc. is one of the largest Internet retailers in the world. Target Corporation is one of the largest value-priced general merchandisers operating in the United States. Target sells through nearly 1,800 brick-and-mortar stores and through the Internet. Amazon and Target compete for customers across a wide variety of products, including media, general merchandise, apparel, and consumer electronics. Cost of goods sold and inventory information from a recent annual report are provided for both companies as follows (in millions):

		Amazon		Target
Cost of goods sold		$62,752		$51,160
Inventories:
Beginning of year		7,411		7,903
End of year		8,299		8,766

a. Compute the inventory turnover for both companies. Round all calculations to one decimal place.

		Inventory Turnover
Amazon.com
Target

b. Compute the number of days sales in inventory for both companies. Assume a 365-day year. If required, round all computations to one decimal place and use in subsequent calculations. Round final answers to one decimal place.

		Number of Days Sales in Inventory
Amazon.com		days
Target		days

c. Which company has the better inventory efficiency?

d. What might explain the difference in inventory efficiency between the two companies?

The sales team of Amazon is more efficient than the sales team of Target Corporation.

Target's merchandising strategy requires a more significant investment in inventory than Amazon's.

The profit margin of Amazon is much higher than that of Target Corporation.

Amazon is a much larger company than Target and has the resources to handle its funds in an efficient manner.