Question

Splish Brothers Merchants reported the following on its income statement for the fiscal year ended December...

Splish Brothers Merchants reported the following on its income statement for the fiscal year ended December 31, 2021 and 2020.

2021 2020
Sales $496,060 $475,390
Cost of goods sold
    Beginning inventory 146,480 154,124
    Net purchases 345,990 322,960
    Ending inventory (138,774) (146,480)
Cost of goods sold 353,696 330,604
Gross profit 142,364 144,786
Operating expenses 87,568 89,168
Profit $54,796 $55,618

Calculate the inventory turnover ratio for Splish Brothers for 2021 and 2020. (Round answers to 2 decimal places, e.g. 52.75.)

2021 2020
Inventory turnover times times

Calculate the days sales in inventory for Splish Brothers for 2021 and 2020. (Round answers to 0 decimal places, e.g. 5,275 and use 365 days for calculation.)

2021 2020
Days sales in inventory days days

Calculate the gross profit margin for Splish Brothers for 2021 and 2020. (Round answers to 1 decimal place, e.g. 52.7%.)

2021 2020
Gross profit margin % %

Calculate the profit margin for Splish Brothers for 2021 and 2020. (Round answers to 1 decimal place, e.g. 52.7%.)

2021 2020
Profit margin % %

For each ratio calculated in (a), (b), (c) and (d) above, identify if the ratio has improved or deteriorated from 2020 to 2021.

Inventory turnover                                                                       DeterioratedImproved
Days sales in inventory                                                                       DeterioratedImproved
Gross profit margin                                                                       ImprovedDeteriorated
Profit margin                                                                       ImprovedDeteriorated
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Answer #1
2021 2020
Average inventory [ ( Beginning inventory + Ending inventory ) / 2 ] 142627 150302
2021 2020
Inventory turnover [ Cost of goods sold / Average inventory ] 2.48 2.20
Days sales in inventory [ 365 / Inventory turnover ] 147 166
Gross profit margin [ Gross profit / Sales ] 28.7% 30.5%
Profit margin [ Profit / Sales ] 11.0% 11.7%
Inventory turnover Improved
Days sales in inventory Improved
Gross profit margin Deteriorated
Profit margin Deteriorated
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