We are comparing The Home Depot, Inc. and Lowe's Companies, Inc., the two giant retailers in home & construction products and services, regarding their inventory turns and inventory costs.
QUESTION 23 (1o points)- Inventory Turns and Inventory Costs We are comparing The Home Depot, Inc. and Lowe's Companies, Inc., the two giant retailers in home & construction products and services, regarding their inventory turns and inventory costs. (a)[2] You need to find official corporate data for 2016 to fill in the first part of the table below Specifically, you need to locate annual reports and 10-K fillings for 2016 on - The Home Depot, Inc.: http://corporate.homedepot.com/ - Lowe's Companies, Inc.: http://www.lowes.com/and find "Investor Relations" Assume that the average annual inventory holding cost rate is 24% for both companies; price and inventory turns are independent; and there are 365 days of operations in a year. Note that Gross profit Net sales-COGS; and Gross profit margin = Gross profit/Net Sales For the following parts, show equations and calculations, and complete the table (b)[2] What is the average number of days that a product typically stays in the two companies inventories until sold (inventory duration)? (2 decimals) Part 1 - Indicators in 2016 End of fiscal year(date) Net sales (millions of $) Cost of goods sold (COGS, millions of $) Gross profit (millions of $) Merchandise Inventory (millions of $) Gross profit margin (GPM, %, 2 decimals) Annual inventory cost rate (%, 2 decimals) Part 2 - Inventory Turns Inventory duration (days, 2 decimals) Inventory turns (turns per year, 2 decimals) Part 3 - Inventory Costs A cordless drill (S) Per-unit inventory holding cost rate (%, 2 decimals) Inventory holding cost (S) Inventory holding cost difference (Lowes HomeDepot, S) Gross profit (S) Immediate gross profit ($) (c)[1] What are the inventory turns a year at these two retailers? (2 decimals) (d)[1] what are the per-unit inventory cost rates at the two companies? (%, 2 decimals) (e)[2] Regarding equivalent cordless drills with the same unit cost of $90, which retailer has the lower inventory holding cost and by how much? (Dollar amounts) (f) [2] Find the average gross profit on an inventory merchandise investment of $90. Then, find the immediate gross profit (gross profit minus inventory holding cost). Which company has the higher immediate gross profit? Home Depot Lowe's 24.00% 24.00% Home De Lowe's Home De Lowe's $90.00 90.00 QUESTION 23 (1o points)- Inventory Turns and Inventory Costs We are comparing The Home Depot, Inc. and Lowe's Companies, Inc., the two giant retailers in home & construction products and services, regarding their inventory turns and inventory costs. (a)[2] You need to find official corporate data for 2016 to fill in the first part of the table below Specifically, you need to locate annual reports and 10-K fillings for 2016 on - The Home Depot, Inc.: http://corporate.homedepot.com/ - Lowe's Companies, Inc.: http://www.lowes.com/and find "Investor Relations" Assume that the average annual inventory holding cost rate is 24% for both companies; price and inventory turns are independent; and there are 365 days of operations in a year. Note that Gross profit Net sales-COGS; and Gross profit margin = Gross profit/Net Sales For the following parts, show equations and calculations, and complete the table (b)[2] What is the average number of days that a product typically stays in the two companies inventories until sold (inventory duration)? (2 decimals) Part 1 - Indicators in 2016 End of fiscal year(date) Net sales (millions of $) Cost of goods sold (COGS, millions of $) Gross profit (millions of $) Merchandise Inventory (millions of $) Gross profit margin (GPM, %, 2 decimals) Annual inventory cost rate (%, 2 decimals) Part 2 - Inventory Turns Inventory duration (days, 2 decimals) Inventory turns (turns per year, 2 decimals) Part 3 - Inventory Costs A cordless drill (S) Per-unit inventory holding cost rate (%, 2 decimals) Inventory holding cost (S) Inventory holding cost difference (Lowes HomeDepot, S) Gross profit (S) Immediate gross profit ($) (c)[1] What are the inventory turns a year at these two retailers? (2 decimals) (d)[1] what are the per-unit inventory cost rates at the two companies? (%, 2 decimals) (e)[2] Regarding equivalent cordless drills with the same unit cost of $90, which retailer has the lower inventory holding cost and by how much? (Dollar amounts) (f) [2] Find the average gross profit on an inventory merchandise investment of $90. Then, find the immediate gross profit (gross profit minus inventory holding cost). Which company has the higher immediate gross profit? Home Depot Lowe's 24.00% 24.00% Home De Lowe's Home De Lowe's $90.00 90.00
