Below is financial information for two restaurant retailers. Popper’s Company op
ID: 2822838 • Letter: B
Question
Below is financial information for two restaurant retailers. Popper’s Company operates an innovative retail bakery-cafe business and franchising business. At the end 2010, Popper’s had 132 company-owned and 346 franchise-operated bakery-cafes. Popper’s located most of their unique bakery-cafe concept stores in suburban, strip mall, and regional mall locations. As a first mover in this concept, the company operates in 32 states. Simmer Corporation began operations five years earlier than Popper’s and purchases and roasts whole bean coffees and sells them, along with numerous coffee drinks and related products at over 2,900 Company-operated retail stores.
Selected Data for Popper’s Company and Simmer Corporation
(amounts in millions)
?
Simmer
Popper’s
Net Sales
Sales Simmer $5,000 Popper’s 300
$4,076
$278
Cost of Goods Sold
1,686
97
Interest Expense
0
0
Net Income
268
22
Average Inventory
303
4
Average Fixed Assets
2,163
130
Required:
a.
Compute the Inventory turnover, fixed asset turnover, and accounts receivable turnover.
b.
Describe the likely reasons for the difference in the accounts receivable turnover and the inventory turnover
?
Simmer
Popper’s
Net Sales
Sales Simmer $5,000 Popper’s 300
$4,076
$278
Cost of Goods Sold
1,686
97
Interest Expense
0
0
Net Income
268
22
Average Inventory
303
4
Average Fixed Assets
2,163
130
Explanation / Answer
Inventory Turnover Ratio = Cost of Goods sold/Average Inventory Simmer = 1686/303 = 5.6 Popper = 97/4 = 24.3 Fixed Asset Turnover = Sales/Fixed assets Simmer = 5000/2163 = 2.3 Popper = 300/130 = 2.3 Popper has higher inventory turnover ratio which may be due to good location of its stores that ensures quick sales of its products
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