The value of inventory turnover may lie in benchmarking against competitors to be able to make apples-to-apples comparisons. Comparing companies that operate in different industries or sectors can be misleading and may not provide an accurate representation of a company's performance. For example, comparing Target and Honda, or Apple Inc and Home Depot, would not be meaningful as these companies operate in vastly different industries with different business models, inventory management practices, and supply chain structures. Therefore, comparing companies within the same industry or sector is crucial when benchmarking inventory turnover. Instructions for Analyzing Imventory Turnover in a Specific Industry 1. Download the provided CSV file Inventory Turnover-1 x. 5x \& for benchmarking inventory turnover analysis for firms in the chosen industry. 2. Choose a pair of companies from the given industries, For example, Target vs Walmart, Lowe's vs Home Depot, or Honda vs GM. 3. Identify the columns for COST OF GOODS SOLD (COGS) and AVERAGE INVENTORY for the chosen companies. 4. Calculate inventory turnover ratio for each company by dividing COGS by AVERAGE INVENTORY, Inventory turnover ratio = COGS / AVERAGE INVENTORY. 5. Compare the inventory turnover ratios of the two companies. Which company has a higher inventory turnover ratio? 6. Compute irventory turnover in days for each company by using the formula 365 divided by the inventory turnover ratio. Inventory tumover in days =365/ Inventory Turnover Ratio. 7. Plot the imventory turnover in days for both companies on a line chart using Excel or any other soltware of your choice. 8. Interpret the results based on your analysis, is inventory turnover higher the better? What do the inventory turnover ratios and days indicate about the efficiency of the companies' inventory management practices? Submission Guideline Upload your spreadsheet on Canvas. The value of inventory turnover may lie in benchmarking against competitors to be able to make apples-to-apples comparisons. Comparing companies that operate in different industries or sectors can be misleading and may not provide an accurate representation of a company's performance. For example, comparing Target and Honda, or Apple Inc and Home Depot, would not be meaningful as these companies operate in vastly different industries with different business models, inventory management practices, and supply chain structures. Therefore, comparing companies within the same industry or sector is crucial when benchmarking inventory turnover. Instructions for Analyzing Imventory Turnover in a Specific Industry 1. Download the provided CSV file Inventory Turnover-1 x. 5x \& for benchmarking inventory turnover analysis for firms in the chosen industry. 2. Choose a pair of companies from the given industries, For example, Target vs Walmart, Lowe's vs Home Depot, or Honda vs GM. 3. Identify the columns for COST OF GOODS SOLD (COGS) and AVERAGE INVENTORY for the chosen companies. 4. Calculate inventory turnover ratio for each company by dividing COGS by AVERAGE INVENTORY, Inventory turnover ratio = COGS / AVERAGE INVENTORY. 5. Compare the inventory turnover ratios of the two companies. Which company has a higher inventory turnover ratio? 6. Compute irventory turnover in days for each company by using the formula 365 divided by the inventory turnover ratio. Inventory tumover in days =365/ Inventory Turnover Ratio. 7. Plot the imventory turnover in days for both companies on a line chart using Excel or any other soltware of your choice. 8. Interpret the results based on your analysis, is inventory turnover higher the better? What do the inventory turnover ratios and days indicate about the efficiency of the companies' inventory management practices? Submission Guideline Upload your spreadsheet on Canvas
