A recent income statement of Walmart reports sales of $405,046 million and cost

Question

A recent income statement of Walmart reports sales of $405,046 million and cost of goods sold of $304,657 million for the year ended January 31, 2010. The comparable sales and cost of goods sold figures for the year ended one year earlier were $401,087 million and $304,056 million, respectively. As you would expect, to be able to achieve this high level of sales, a great deal of inventory must be maintained so that customers will find what they want to buy when they shop in Walmart stores. In fact, in the January 31, 2010, balance sheet, inventory is presented at $33,160 million and the comparable figure for a year earlier is $34,511 million.

Compute the inventory turnover for Walmart for both years for 2010 & 2009

Compute the average number of days required by Walmart to sell its inventory for the same years.

Explanation / Answer

Hi Inventory turnover for 2010 will be calculated as follows: COGS for 2010/Avg Inventory = 304,657/(33,160 + 34,511)/2 =304,657/33,836 = 9 Inventory turnover for 2009 will be calculated as follows: COGS for 2009/Ending Inventory = 304,056/(34,511) = 8.81 (this is because we don't have details for opening inventory for the year 2009. Average no. of days for 2010 will be: 365/9 (Inventory Turn. Ratio for 2010) = 40.56 or 41 days Average no. of days for 2009 will be: 365/8.81 (Inventory Turn. Ratio for 2009) = 41.53 or 42 days Thanks, Aman

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