Kracker, Foodstuff Inc., and Winston Stores Inc. are three large grocery chains.
ID: 2472212 • Letter: K
Question
Kracker, Foodstuff Inc., and Winston Stores Inc. are three large grocery chains. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the following merchandise inventory information:
The cost of goods sold for each company was:
a. Determine the number of days' sales in inventory and the inventory turnover for each of the three companies. Assume 365 days a year. Round all interim calculations to one decimal place. For number of days' sales in inventory, round final answers to the nearest day, and for inventory turnover, round to one decimal place.
B) If Winston had Kracker's number of days' sales in inventory, how much additional cash flow would have been generated from the smaller inventory relative to its actual average inventory position? Round interim calculations to one decimal place and your final answer to the nearest million.
$___________ millions
[Please answer blank spaces :) ]
Merchandise Inventory End of Year (in millions) Beginning of Year (in millions) Kracker $2,728 $2,482 Foodstuff 2,732 2,514 Winston 2,438 2,122Explanation / Answer
a.
Inventory turnover = Cost of goods sold / Average inventory
Number of days' sales in inventory = 365 / Inventory turnover
b. Winston's actual average inventory = $ 2,280 million
If Winston had 26.8 days sales in inventory , its inventory turnover would have to be 365 / 26.8 = 13.6
For the inventory turnover to be 13.6, Winston's average inventory would need to be $ 21, 942 / 13.6 = $ 1,613.4 million.
Therefore, the additional cash flow that would have been generated = $ ( 2,280 - 1,613.4) = $ 666.6 million
Company Number of days' sales in inventory Inventory Turnover Kracker 26.8 days 13.6 Foodstuff 27 days 13.5 Winston 38 days 9.6Related Questions
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