Question

Aegis Industries Inc., is the biggest snowmobile manufacturer in the world. It reported the following amounts in its financial statements (in millions):

	2012			2013			2014			2015
Net Sales Revenue	$	5,100		$	4,560		$	3,890		$	3,470
Cost of Goods Sold		3,520			3,110			2,710			3,070
Average Inventory		510			460			400			390

Required:

1. 1-a. Calculate the inventory turnover ratio for 2015, 2014, and 2013.
2. 1-b. Calculate the average days to sell inventory for 2015, 2014, and 2013.
3. 2. Is Aegis performing better than its competitor Snow Pack Corporation where the inventory turned over is 5.1 times in 2015 (71.6 days to sell). Both companies use the same inventory costing method (FIFO).

Answer 1

1-a) Inventory turnover ratio for 2015, 2014, and 2013:

Inventory Turnover ratio=Cost of Goods sold/Average Inventory

Inventory Turnover ratio -2015 = $3,070/$390 = 7.87 times

Inventory Turnover ratio -2014 = $2,710/$400 = 6.77 times

Inventory Turnover ratio -2013 = $3,110/$460 = 6.76 times

1-b) Average days to sell inventory for 2015, 2014, and 2013

Average days to sell Inventory = Average Inventory * 365 / Cost of goods sold

2015 = $390*365 / $3,070 = 46.37days

2014 =$400*365 / $2,710 = 53.87days

2013 = $460*365 / $3,110 = 53.99 days

2.Yes, Aegis performing better than its competitor