1. My homework assignment requires me to compare the ratios between Dunkin\' Don

Question

1. My homework assignment requires me to compare the ratios between Dunkin' Donuts and Starbucks for fiscal 2014. Their 'inventory turnover' and 'days in inventory' apparently is 0 (unreported). The ratio for 'days in receivable' is 25.12 and 'days in payable' is 30.33. Would it still be possible to find the 'operating cycle' without the 'days in inventory'?

2. Find the Defensive Interval Ratio for Starbucks and Dunkin' Donuts for fiscal 2014.

Attached are the Income Statement and Balance Sheets for both companies, please focus ONLY on 2014.

EFFECTIVENESS RATIOS RATIO Asset Turnover Dunkin' Donuts (2014) Starbucks (2014) 0.23 1.47 Inventory Turnover Days in Inventory Accounts Receivable Turnover Days in Receivable-days sales outstanding Accounts Payable Turnover Days in Payable-payables period Operating cycle 0 6.23 0 58.59 14.52 25.12 12.03 30.33 5.21 27.58 13.23 13.37 27.28 44.54

Explanation / Answer

Calculation of Operating Cycle for Dunkin' Donuts 2014:

Operating Cycle = Days' Sales of Inventory + Days Sales Outstanding = 0 + 25.12 = 25.12

In the given situation Days' Sales of Inventory is 0 because there is no inventory for Dunkin' Donuts 2014. Hence the Operating Cycle Shall be equal to Days Sales Outstanding

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