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Baker Mfg Inc. 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. Baker Mfg. Inc. Net Revenue ​$27 comma 500 Cost of sales ​$21 comma 440 Inventory ​$1 comma 230 Total assets ​$16 comma 250 ​a) What is​ Baker's inventory​ turnover? nothing times per year ​(round your response to two decimal​ places). ​b) What is​ Baker's percent of assets committed to​ inventory? nothing​% ​(enter your response as a percentage rounded to two decimal​ places). ​c) How does​ Baker's performance compare to the industry​ leaders? ▼ Worse In Line with Industry Better

Respuesta :

Answer:

a) Baker's inventory turnover is 17.43 times per year.

b) Baker's percent of assets committed to inventory is 8%.

c) Baker's performance is better than the industry leaders.

a. We use the following formula to calculate the Inventory Turnover Ratio (ITR):

[tex]ITR = \frac{Cost of Goods Sold}{Inventory}[/tex]

[tex]ITR = \frac{21440}{1230}[/tex]

[tex]\mathbf{ITR = 17.43 times}[/tex]

b. We can calculate the percent of assets committed to inventory as

[tex]\frac{Inventory}{Total Assets} *100[/tex].

[tex]percentage of assets in inventory = \frac{1230}{16250} *100[/tex]

[tex]percentage of assets in inventory = 8 percent[/tex]

c. Baker has the same percentage of assets in inventory as the industry leaders. However, its inventory turnover ratio is higher than that of the industry benchmark.

A higher inventory turnover ratio is preferred and is considered a sign of better performance, all other things remaining constant. Hence we can say that Baker's performance is better than the industry leaders.

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