The asset side of the 2013 balance sheet for CarMax Inc. is below.

CarMax, Inc.
CONSOLIDATED BALANCE SHEETS
As of February 28 or 29
(In thousands)	2013	2012
Cash and cash equivalents	$449,364	$ 442,658
Restricted cash from collection on auto loan receivables	224,287	204,314
Accounts receivable, net	91,961	86,434
Inventory	1,517,813	1,092,592
Deferred income taxes	5,193	9,938
Other current assets	21,513	17,512
Total current assets	2,310,131	1,853,448
Auto loan receivables, net	5,895,918	4,959,847
Property and equipment, net	1,428,970	1,278,722
Deferred income taxes	145,875	133,134
Other assets	107,708	106,392
Total assets	$9,888,602	$8,331,543

The footnotes to the annual report include the following:

(H) Inventory

Inventory is primarily comprised of vehicles held for sale or currently undergoing reconditioning and is stated at the lower of cost or market. Vehicle inventory cost is determined by specific identification. Parts and labor used to recondition vehicles, as well as transportation and other incremental expenses associated with acquiring and reconditioning vehicles, are included in inventory.

Required:

a. Does CarMax use the LIFO or the FIFO method of inventory costing? Explain.

b. Calculate common-sized inventories for both years and comment on any differences that you note. Given that the company is an automotive retailer, does this ratio seem appropriate?

c. At February 28, 2011, Inventory was $1,049,477 thousand. CarMax reports cost of sales of $9,498,456 thousand for the year ended February 28, 2013 and $8,624,838 thousand for the year ended February 29, 2012. Compute inventory turnover and average days inventory outstanding for both years. Do the two ratios tell the same story? Why or why not?

d. CarMax reports revenue of $10,962,818 thousand for the year ended February 28, 2013 and $10,003,599 thousand for the year ended February 29, 2012. Calculate gross profit margins for both years.

e. What is your opinion about the financial health of CarMax? Use the ratios you calculated above to support your opinion.