Wawa Food Markets is a convenience store chain located primarily in the Northeast. The company sells gas, candy bars, drinks, and other grocery-related items.
St. Jude Medical Incorporated sells medical devices related to cardiovascular needs. Suppose a local Wawa Food Market and St. Jude sales office report the following amounts in the same year (company names are disguised):
________________________________Company 1 Company 2
Net sales.......................................$300,000...............$300,000
Cost of goods sold..............................90,000................240,000
Gross profit....................................$210,000...............$ 60,000
Average inventory.............................$ 30,000...............$ 20,000
Required:
1. For Company 1 and Company 2, calculate the inventory turnover ratio.
2. For Company 1 and Company 2, calculate the gross profit ratio.
3. After comparing the inventory turnover ratios and gross profit ratios, which company do you think is Wawa and which is St. Jude? Explain.