Continuing Company Analysis-Amazon: Inventory turnover and Number of days\' sale

Question

Continuing Company Analysis-Amazon: Inventory turnover and Number of days' sales in inventory Amazon.com, Inc. is one of the largest Internet retailers in the world. Target Corporation is one of the largest value-priced general merchandisers operating in the United States. Target sells through nearly 1,800 brick-and-mortar stores and through the Internet. Amazon and Target compete for customers across a wide variety of products, including media, general merchandise, apparel, and consumer electronics. Cost of goods sold and inventory information from a recent annual report are provided for both companies as follows (in millions): Amazon Target Cost of goods sold $62,752 $51,160 Inventories: 7,903 Beginning of year End of year 7,411 8,299 8,766 a. Compute the inventory turnover for both companies. Round all calculations to one decimal place Amazon.com Target b. Compute the number of days' sales in inventory for both companies. Assume a 365-day year. If required, round all computations to one decimal place and use in subsequent calculations. Round final answers to one decimal place. Nümber of Days Sales in Inventory Amazon.com Target c. Which company has the better inventory efficiency? days days

Explanation / Answer

Amazon target COGS 62752 51160 Beginning Inventory 7411 7903 Ending inventory 8299 8766 Average inventory 7855 8335 (Ending+Beginning Inventory)/2 Inventory turnover ratio 7.99 6.14 (COGS/ Average inventory) No. of days sales in inventory 45.68 59.45 (Number of days / Inventory turnover) Req a: Inventry Turnover Amazon 7.99 times Target 6.14 times Req b: Numbe of days sales in inventory Amazon 45.7 days Target 6.1 days Req c: Amazon is more efficient. Reqd: Answer is 1. Sales team of Amazon is more efficient than the team of Target

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