turnover ratios vary by The gross profit margin (GP %) compares gross profit to sales revenue. It expresses gross profit as a e of sales. This ratio is the first measure of profitability reported on the income statement. percentage Q1 GROSS PROFIT MARGIN= Gross profit Sales revenue Guess the GP % and ROS for each of the following companies: GP% a. b. Apple (AAPL) (computers) Bristol-Myers Squibb (BMY) (pharmaceuticals) (70% / 40% / 20%) ROS C. Kroger (KR) (grocery) (70% / 40% / 20%) (25%/20%/2%) (25%/20%/2%) d. What do the above ratios reveal about each of the companies? (70% / 40% / 20% ) (25%/20%/2%) e. f. The information for both the numerator and denominator of the ratios above come from the (balance sheet/income statement/ statement of cash flows). Gross profit margin is the (first / second / last) indication of profitability on the income statement. INVENTORY TURNOVER RATIO The inventory turnover ratio indicates the number of times a company sells its average inventory level during the year. It measures how efficiently a company uses its investment in inventory. It is a measure of efficiency. 22 Cost of goods sold INVENTORY TURNOVER RATIO= Inventory Guess the inventory turnover ratio for each of the following companies: Wal-Mart-(discount retailer) a. b. Kroger-(grocery) C. Dell Computer-(computer) d. JC Penney-(department store) Q3 13 (4/8/12/35) (4/8/12/35) (4/8/12/35) (4/8/12/35) What does the inventory turnover ratio reveal about each of the companies? Q4 What are some of the costs of holding inventory