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Q4. (7 points) Your employer wants you to compare the inventory turnover ratios of Exxon Mobil and BP. You find the following information in the
Q4. (7 points) Your employer wants you to compare the inventory turnover ratios of Exxon Mobil and BP. You find the following information in the financial statements of the two companies. (All numbers are in billions) BP Exxon Mobil COGS in FY 2010 281.2 235.9 Inventory, Dec. 31, 2009 22.8 11.6 Inventory, Dec. 31, 2010 26.5 13.0 BP uses FIFO and Exxon Mobil uses LIFO. In addition, the following information is provided in the footnotes to Exxon Mobil's financial statements: As of Dec 31, 2010 As of Dec 31, 2009 LIFO Reserve 21.3 17.1 How would you compare the inventory turnover ratios of the two companies? Which company managed its inventory more efficiently in 2010? (Hint: Inventory turnover ratio=COGS/average inventories)
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