Baker Mfg. Inc. (see Table 11.9) wishes to compare its inventory turnover to those of industry leaders, who have turnover of about 13 times per year and 8% of their assets invested in inventory.
a) What is Baker's inventory turnover?
b) What is Baker's percent of assets committed to inventory?
c) How does Baker's performance compare to the industry
TABLE 11.9 For Problems 11.5
ARROW DISTRIBUTING CORP.
Net revenue $16,500
Cost of sales $13,500
Inventory $ 1,000
Total assets $ 8,600
BAKER MFG. INC.
Net revenue $27,500
Cost of sales $21,500
Inventory $ 1,250
Total assets $16,600
Inventory turnover = Cost of sales/Inventory = $21,500/$1,250 = 17.2
Percent of assets committed to inventory = Inventory/Total assets = ...
This solution involves comparing industry and company inventory turnover and percent of inventory to total sales.