Real World Financials The table below contains selected information from recent
ID: 2598379 • Letter: R
Question
Real World Financials The table below contains selected information from recent financial statements of The Home Depot, Inc., and Lowe's Companies, Inc., two companies in the home improvement retail industry ($ in millions) Home Depot Lowe' s Net sales cost of goods solo Year-end inventory 1/31/16 2/1/15 1/29/16 1/30/15 $79,432 $75, 374 $54, 037 $51,141 52, 042 49, 052 31,711 33, 334 11, 260 10, 780 9,187 8, 660 Industry Averages Gross profit ratio Inventory turnover ratio Average days in inventory 33 % 3.9 times 94 days Required Calculate the gross profit ratio, the inventory turnover ratio, and the average days in inventory for the two companies for their fiscal years ending in 2016. (Use 365 days a year. Round "Inventory turnover ratio" to 2 decimal places. Enter dollar amounts in millions. Round the dollar answer values to the nearest whole dollars.) Gross Profit Ratio Choose Numerator:I Choose Denominator: Gross Profit Ratio Gross profit ratio HOME DEPOT LOWE'S ventory Turnover Ratio Choose Numerator:I Choose Denominator: - Inventory Turnover Ratio Inventory turnover ratio HOME DEPOT LOWE'S Average Days in Inventory Choose Numerator:I Choose Denominator: - Average Days in Inventory Average days in inventory HOME DEPOT LOWE'SExplanation / Answer
Answer:
Gross Profit Ratio = Gross Profit / Sales * 100
HOME DEPOT:
Gross Profit = $79,432 - $52,042
Gross Profit = $27,390
Gross Profit Ratio = 27,390 / 79,432 * 100
Gross Profit Ratio = 34.48%
LOWE’S:
Gross Profit = $54,037 - $31,711
Gross Profit = $22,326
Gross Profit Ratio = 22,326 / 54,037 * 100
Gross Profit Ratio = 41.32%
Inventory Turnover Ratio = Cost of Goods sold / Average Inventory
HOME DEPOT:
Average Inventory = (11,260 + 10,780) / 2
Average Inventory = $11,020
Inventory Turnover Ratio = 52,042 / 11,020
Inventory Turnover Ratio =4.72 times
LOWE’S DEPOT:
Average Inventory = (9,187 + 8,660) / 2
Average Inventory = $8,923.50
Inventory Turnover Ratio = 31,711 / 8,923.50
Inventory Turnover Ratio =3.55 times
Average Days in Inventory = 365 / Inventory Turnover Ratio
HOME DEPOT:
Average Days in Inventory = 365 / 4.72
Average Days in Inventory = 77.33 days or 77 days
LOWE’S:
Average Days in Inventory = 365 / 3.55
Average Days in Inventory = 102.82 days or 103 days
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.