E13-10 Inferring Financial Information from Profitability and Liquidity Ratios [

Question

E13-10 Inferring Financial Information from Profitability and Liquidity Ratios [LO 13-4, LO 13-5] Dollar General Corporation operates general merchandise stores that feature quality merchandise at low prices to meet the needs of middle-, low-, and fixed income families in southem, eastern, and midwestern states. For the year ended January 31, 2014, the company reported average inventories of $2,475 (in millions) and an inventory turnover of 4.89. Average total fixed assets were $2,080 (milion) and the foxed asset turnover ratio was 8.14 Required: 1-a. Calculate Dollar General's net sales and cost of goods sold? (Enter your answers in whole dollars.) Net Sales Cost of Goods Solo 1-b. What does this imply about the amount of gross profit made from each dollar of sales? (Do not round intermodiate calculations. Round your answer to 1 decimal place.) 2. Is this an improvement from the gross profit percentage of 31.7 percent earned during the previous year? Yes No Hints References eBook & Resources

Explanation / Answer

Req 1-A: Inventory turnover = 4.89 Average inventory    $2475 Inventory turnover = Cost of Goods sold / Average inventory 4.89 = Cost of goods sold / 2475 Therefore, cost of goods sold = 2475*4.89 = $12,102.75 Average total fixed asset $ 2080 Fixed assets turnover ratio = 8.14 Fixed assets turnover ratio = Sales / Average fixed assets 8.14 = Sales / 2080 Therefore, Sales = 2080 *8.14 = $ 16,931.20 Net Sales $16,931.20 Cost of Goods sold $12,102.75 Req 1-B Amount of gross profit= Net sales - Cost of goods sold = 16931.20 - 12102.75 = $ 4,828.45 Gross profit percentage = Gross Profit / Net sales *100 ( 4828.45 / 16931.20) *100 = 28.52% Req 2: As previous year, Gross profit percentage is 31.7%, current year Gross profit perentage is 28.52%. There is no improvement in Gross profit percentage

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.