part b PLS Inventory Turnover and Number of Days\' Sales in Inventory Kracker, F

Question

part b PLS

Inventory Turnover and Number of Days' Sales in Inventory Kracker, Foodstuff Inc., and Winston Stores Inc. are three large grocery chains. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the following merchandise Merchandise Inventory End of Year (in millions) Beginning of Year (in millions) Kracker Foodstuff Winston The cost af gaods sold for pach company was: 4,669 4,524 4,940 $2,754 4,750 9,880 Cost of Goods Sold (in millions) 51,348 36,192 69,160 Winston a. Determine the number of days sales in inventory for each of the three companies, Assume 365 days a year Round all interim calculations to one decimal place. For number of days' sales in inventory, round final answers to the nearest day, and for inventory turnaver, round to one decimal place. Company names Kracker Foodstuff Winston Number of Days' Sales in Inventory 27 days 47 days 39 days Inventory Turnover 13.0 7.8 9.3 b. If winston had Kracker's number of days sales in inventory, how much additional cash flow would have been generated from the smaller Inventory relative to its actual average inventory position? Round interim calculations to one decimal place and your final answer to the nearest million 2,294.1X million Feedback Chack My Work a. 1. Determine the average dally cost of the merchandise sold by dmiding the cost or goods sold by 365 Dvide the average inventory by the average daly cost of the merchandis8 sold. The average inventory is the total of the begi and e g inventorias divided by two Check My Work Previous Next

Explanation / Answer

No. of days sales in inventory = average inventory/(cost of goods sold/365)

Winston's new no. of days sales in inventory = 27

Let Winston's average inventory be "x"

Thus 27 = x/(69160/365)

or 27 = x/189.48

or x = $5,115.95

Therefore, the additional cash flow that would have been generated is the difference between the actual average inventory and the hypothetical average inventory as follow:

Thus the answer is $2294 million.

Actual average inventory 7410 Hypothetical average inventory 5115.95 Positive cash flow potential 2294

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