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The following information pertains to two competitors, Clovis Inc. and Bantu Ltd.
Company Beginning Inventory Ending Inventory Cost of Goods Sold
Clovis Inc. $155,000 $225,000 $1,375,000
Bantu Ltd. $675,000 $420,000 $1,945,000
Clovis Inc. reported sales revenue of $1,875,000, and Bantu Ltd. reported sales revenue of $4,885,000.
i)Calculate the inventory turnover and days to sell inventory ratios for Clovis and Bantu.
ii)Calculate the gross margin and gross margin ratio for Clovis and Bantu.
iii)On the basis of inventory turnover, which company is moving its inventory faster? Does that mean the inventory is better managed? Explain
iv)On the basis of gross margin ratio, which company is earning a higher profit margin?
v)Which company do you think is better managed? Explain your answer.
vi)Estimate the capital that Clovis could free up if it were to reduce its days to sell inventory ratio by five days.
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