Corporal Inc. and Admiral Company compete with each other in the personal computer market....

Question:

Corporal Inc. and Admiral Company compete with each other in the personal computer market. Corporal's primary strategy is to assemble computers to customer orders, rather than for inventory. Thus, for example, Corporal will build and deliver a computer within four days of a customer entering an order on a Web page. Admiral, on the other hand, builds some computers prior to receiving an order, then sells from this inventory once an order is received. Below is selected financial information for both companies from a recent year's financial statements (in millions):

Corporal Inc.Admiral Company
Sales$91,980$116,100
Cost of goods sold$76,650$109,500
Inventory, beginning of period$2,861$11,060
Inventory, end of period$3,061$13,060

Determine for both companies (1) the inventory turnover and (2) the number of days' sales in inventory.

Inventory Turnover:

Inventory turnover is a ratio that describes the ability of a company to sell its inventory for one year. A high ratio indicates that the company is effectively managing its inventory and converting it into cash.

Answer and Explanation: 1

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1.

Corporal Company:

{eq}Average \ inventory \ = \ \dfrac{Beginning \ receivables \ + \ Ending \ receiables}{2} \\ Average \ inventory \ = \...

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What Is Inventory Turnover? - Definition, Formula & Calculation

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Chapter 6 / Lesson 13
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Inventory turnover is the ratio of how much a company has sold its products and replaced its supply during a specific period of time. Learn more about the definition of inventory turnover, formulas used for computing it, and the calculation steps for determining it.


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