Question

The following information is available for The Coca-Cola Company (in U.S. $ millions): 2018 2017 2016 Cost of goods sold $11,770 $13,255 $16,465 Inventories 2,766 2,655 2,675 Current assets 30,634 36,545 34,010 Current liabilities 29,223 27,194 26,532 In the notes to its financial statements, Coca-Cola disclosed that it uses the FIFO and average cost formulas to determine the cost of its inventory. The industry averages for the inventory turnover, days in inventory, and current ratios are as follows: 2018 2017 Inventory turnover 9.7 times 7.7 times Days in inventory 38 days 47 days Current ratio 1.1:1 1.3:1 (a1) Calculate Coca-Cola’s inventory turnover, days in inventory, and current ratios for 2018 and 2017. (Round inventory turnover and current ratio to 1 decimal place, e.g. 15.2. Round days in inventory to nearest day.) Inventory Turnover Days In Inventory Current Ratio 2018 times days :1 2017 times days :1.

Answer 1

1. Inventory Turnover

Inventory Turnover = Cost of goods sold / Average Inventories

Inventory Turnover	2018	2017
Average Inventories	($2,655 + $2,766) / 2 = $2,710.50	($2,675 + $2,655) / 2 = $2,665
Inventory Turnover	$11,770 / $2,710.50 = 4.3 times	$13,255 / $2,665 = 5.0 times

2. Days in Inventory

Days in Inventory = 365 days / Inventory Turnover

Days in Inventory	2018	2017
Days in Inventory	365 days / 4.3 times = 85 days	365 days / 5.0 times = 73 days

3. Current Ratio

Current Ratio = Current Assets / Current Liabilities

Current Ratio	2018	2017
Current Ratio	$30,634 / $29,223 = 1.0 : 1	$36,545 / $27,194 = 1.3 : 1

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