Question

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

  

	2012		2011		2010		2009
Net Sales Revenue	$	4,500	$	3,960	$	3,290	$	2,870
Cost of Goods Sold		3,760		3,300		2,810		2,470
Average Inventory		450		400		340		330

  

Required:
1-a.	Calculate the inventory turnover ratio for 2012, 2011, and 2010. (Round your answers to 1 decimal place.)

        

1-b.	Calculate the average days to sell inventory for 2012, 2011, and 2010. (Use 365 days in a year. Use rounded "Inventory Turnover Ratio" and round your answers to 1 decimal place.)

        

2.

Is Aegis performing better than its competitor Sabertooth where the inventory turned over is 6.7 times in 2012 (54.5 days to sell). Both companies use the same inventory costing method (FIFO).

	Yes
	No

Answer 1

It should be noted that Inventory turnover ratio makes the comparision of Cost of Goods sold with Average Inventory to see how effectively inventory is being managed.

Inventory turnover ratio = Cost of goods sold / Average Inventory

Average days to sell inventory is calculated by using the formulae as 365 / Inventory turnover ratio

Sabertooth takes average days to sell inventory as 54.5 days with inventory turnover ratio of 6.7 times which is not better than Aegis Industries. Since Aegis takes less to sell average inventory.