You are an investor comparing the financial records of two similar electronics retailers, Future Shop and Electro City. These retailers are fierce competitors; they have the same product mix and target markets. Both companies have their fiscal year-ends on December 31^st.

Review the following financial statement excerpts and answer the questions below. Assume all inventories are saleable, i.e., none of the inventories will need to be marked down or written off like we saw in the David Berman case.

1. Use Littles Law to determine how many months on average Future Shop held its inventory before selling it. Compute this statistic for the year 2020.

2. (Compute the same thing for Electro City) Use Littles Law to determine how many months on average Electro City held its inventory before selling it. Compute this statistic for the year 2020.

3. How many times did Future Shop and Electro City turn over their inventories in 2020?

4. Based solely on inventory turns, which company is managing their inventory more efficiently? Is higher or lower inventory turns generally better, and why?

5. Compute the gross margins for both Future Shop and Electro City.

6. Based solely on inventory turns and gross margins, which company is the better investment? Why?

Balance Sheet Excerpts Future Shop - Inventory Electro City - Inventory As of Dec 31, 2019 $40M $50M As of Dec 31, 2020 $60M $46M Income Statement Excerpts Future Shop - Sales Future Shop - Cost of Goods Sold Electro City - Sales Electro City - Cost of Goods Sold For the Year Ended Dec 31, 2019 $250M $210M $370M $310M For the Year Ended Dec 31, 2020 $300M $240M $360M $288M Balance Sheet Excerpts Future Shop - Inventory Electro City - Inventory As of Dec 31, 2019 $40M $50M As of Dec 31, 2020 $60M $46M Income Statement Excerpts Future Shop - Sales Future Shop - Cost of Goods Sold Electro City - Sales Electro City - Cost of Goods Sold For the Year Ended Dec 31, 2019 $250M $210M $370M $310M For the Year Ended Dec 31, 2020 $300M $240M $360M $288M