Question

Inventory Turnover and days’ sales in inventory

Kroger, Sprouts Farmers Market, Inc., and Whole Foods Markets, Inc. are three grocery chains in the United States. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the following merchandise inventory (in millions) information:

	Kroger	Sprouts	Whole Foods
Cost of merchandise sold	$85,512	$2,541	$9,973
Inventory, end of year	5,688	165	500
Inventory, beginning of year	5,651	143	441

a. & b. Determine the inventory turnover and the number of days’ sales in inventory (use 365 days and round to one decimal place) for the three companies. Round all interim calculations to one decimal place. For days' sales in inventory, round final answers to the nearest day, and for inventory turnover, round to two decimal places.

Company names	Inventory Turnover	Days' Sales in Inventory
Kroger		days
Sprouts		days
Whole Foods		days

c. The inventory turnover ratios and days’ sales in inventory are similar  for Kroger and Sprouts. Whole Foods has a higher  inventory turnover and a lower days’ sales in inventory than Kroger and Sprouts. These results suggest that Kroger and Sprouts are less  efficient than Whole Foods in managing inventory.

d. If Kroger had Whole Foods’ days’ sales in inventory, how much additional cash flow would have been generated from the smaller inventory relative to its actual average inventory position? Round interim calculations to one decimal place and your final answer to the nearest million.
$ million

Answer 1