Jeffrey Gennette is the CEO of Macy's (a United States retailer). Because Jeffrey's bonus is based on the company's earnings, he has directed the controller to use FIFO as the inventory costing method. Jason did not tell the controller his real reason for the directive; instead, he stated that he thought FIFO better reflected the actual flow of inventory costs.

Review company websites then answer the questions.

• Kohl's
• Macy's

1. Jeffrey's decision to select FIFO appropriate? Is it ethical? Is Jeffrey wrong if this will help the company and also benefit him too?
2. What are some of the pitfalls of a company basing a manager's or CEO's compensation on the company's earnings?
3. Using the links provided for Kohl's and Macy's (a United States retailer); determine the inventory turnover ratio for the companies. What does this ratio tell you about these companies? How do the companies compare?
4. Using the links provided for Kohl's and Macys, calculate the number of days in inventory for the companies. What does this ratio tell you about these companies?