Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Textbook Question
Chapter 10, Problem 5QE
Use the following hypothetical data for Walgreens in Years 11 and 12 to project revenues, cost of goods sold, and inventory for Year +1. Assume that Walgreens’s Year +1 revenue growth rate, gross profit margin, and inventory turnover will be identical to Year 12. Project the average inventory balance in Year +1 and use it to compute the implied ending inventory balance.
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Assuming that all net sales figures are at retail and all cost of goods sold figures are at cost, calculate the average inventory (in $) and inventory turnover for the following. If the actual turnover is less than the published rate, calculate the target average inventory necessary to come up to industry standards. If the actual turnover is greater than the published rate, enter "above" for target average inventory. Round inventories to the nearest dollar and inventory turnovers to the nearest tenth
Net Sales
Cost ofGoods Sold
BeginningInventory
EndingInventory
AverageInventory
InventoryTurnover
PublishedRate
TargetAverageInventory
$580,000
$137,250
$77,200
$
4.8
$
Assuming that all net sales figures are at retail and all cost of goods sold figures are at cost, calculate the average inventory (in $) and inventory turnover for the following. If the actual turnover is
less than the published rate, calculate the target average inventory (in $) necessary to come up to industry standards. If the actual turnover is greater than the published rate, enter "above" for
target average inventory. Round inventories to the nearest dollar and inventory turnovers to the nearest tenth.
Net Sales
$4,560,000
Cost of
Goods Sold
Beginning Ending
Inventory Inventory
$858,000 $654,300
Average
Inventory
$
Inventory Published
Turnover
Rate
8.2
Target
Average
Inventory
Chapter 10 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 10 - Prob. 1QECh. 10 - The chapter encourages analysts to develop...Ch. 10 - Prob. 3QECh. 10 - Suppose you are analyzing a firm that is...Ch. 10 - Use the following hypothetical data for Walgreens...Ch. 10 - Prob. 6QECh. 10 - Prob. 7QECh. 10 - Prob. 8QECh. 10 - The Home Depot is a leading specialty retailer of...Ch. 10 - Prob. 10PC
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