Dollar General corporation operates general merchandise stores that feature qual

Question

Dollar General corporation operates general merchandise stores that feature quality merchandise at low prices to meet the needs of middle, low and fixed income families. All stores are located in the US predominantly in small towns in 24 Midwestern and Southeastern states. In a recent year, the company reported average inventories of $1,456,414,000 and an inventory turnover ratio of 4.6. Average total fixed assets were $1,218,874,000 and the fixed asset turnover ratio was 7.5. Determine the gross profit for Dollar General.

Explanation / Answer

From Inventory turnover ratio,                                          Inventory turnover ratio = Cost of goods sold / Average inventory                                                                        4.6 = COGS / $1,456,414,000                                                                  COGS = $6,699,504,400           Therefore, the value of COst of goods sold is $6,699,504,400 From Fixed asset tunover ratio,                                          Fixed asset turnover ratio = Sales / Average total fixed assets                                                                       7.5      = Sales / $1,218,874,000                                                                         Sales = $9,141,555,000 Therefore, the value of Sales is $9,141,555,000 Calculating the value of Gross profit: Sales                                 $9,141,555,000 (-) Cost of goods sold       $6,699,504,400 -------------------------------------------- Gross profit                      $2,442,050,600 --------------------------------------------- Therefore, the value of gross profit is $2,442,050,600

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