PLEASE HELP! ***compare the days on hand results detailing the cost of goods sold, respective days of inventory, and the potential financial impact if the under-performing company could match the days on hand measure of the higher performing company. Assume a 25% carrying cost ratio.
example here:
Company NIKE UNDER COGS (Billions) Inventory 19.3 2.75 (Billions) 5.06 Inventory Turnover Days of Inventory 95.3 3.83b 1.16 2.37b 154.96 Armour ons for Inventory turns COGS/ Inventory> 19.3/5.06 3.83b Days of Inventry 365 days/ Inventory Turns 365/3.83 95.3 days Calculations for Under Armour- Inventory turns cOGS/Inventory 2:75/116-2.37b Days of Inventory 365 days/ Inventory Turns 365/2.37-153.96 days Assignment: Compare the 2017 Days on Hand results for Nike and Under Armour. Write an executive summary (two page, double spaced, 12 pt Georgia or Tahoma font) detailing the daily Cost of Goods Sold, respective days of inventory for 2017 and the potential financial impact if the under-performing company could match the Days on Hand measure of the higher-performing company (by improving processes so that they would require less inventory to operate). Assume a 25% carrying cost ratio. Be careful to use the correct units for the financial impact. (Financial numbers in Income Statements and Balance Sheets are often in Smillions.) Also comment on any other noticeable differences in performance or situation. Provide the date for the financial information. Explain differences in performance (difference in size is not adequate). See the provided example. Daily COGS Annual COGS/ 365 Days Days on Hand - Inventory Daily CoGs Introduction: Dollar General is a discount retailer with annual sales of $19.23 billion out of approximately 12,575 stores supported by 13 distribution centers. Dollar Tree is also a discount retailer (with subsidiaries Dollar Tree Canada and Family Dollar) with $18.54 billion in sales from 13,851 stores supported by 23 distribution centers. By most measures (see key stats and ratios on summary page), Dollar General outperforms Dollar Tree. Results: Inventory turnover - Cost of Revenue/Inventory with days of inventory calculated as 365 days / Inventory Turns. Inventory (Millions) Days of Inventory Company Cost of Inventory Revenue Millions) $14.324.50 $2865.80 DollarGeneral -$15.203.96 $3.2587 .6 8.2 Dollar Tree 5.00 Dollar General calculations: Inventory Turns Cost of Revenue/ Inventory $15,203.96/$3,258.78 4.67 Days of inventory 365 days/Inventory Turns-365 days/4.67-78.2 days Dollar Tree calculations: Inventory Turns Cost of Revenue/Inven Days of inventory = 365 days / Inventory Turns-365 days / 5.oo = Z3.0 daus The results are close enough to be believable. It is interesting that the inventory turnover numbers favor Dollar Tree, yet the key stats and ratios generally favor Dollar General. I suspect the differences are due to slight differences in the nature of their operations. Even though both companies are in the same industry, Dollar Tree has a different business model in terms of variety and price point than Dollar General. ory $14,324-50/$2865.80-5.0 Improvement opportunity: If Dollar General could achieve the same inventory turnover ratio as Dollar Tree, DG could reduce their first year cash flow by $218.04 million and reduce their annual inventory carrying cost bu million as shown in the following calculations $54.51 In order to evaluate the improvement opportumity you must calculate the following New Inventory Level Cost of Revenue/ New Turns $15,203.96M/5.00- 3,040.79 million. Reduction in inventory - Old Inventory-New Inventory 3,070.79 million $218.04 million $3.258.78 million Annual savings Inventory reduction x carrying cost rate - $218.04 Annual savings-Invent $54-51 million
