Question

Inventory Management Three companies that compete in the footwear market are Foot Locker, Finish Line and DSW. The table below shows inventory levels and cost of goods sold for each company for the 2016, 2015 and 2014 fiscal years. Calculate the inventory turnover ratio for each company in each year and summarize your findings. All values are in $ millions.

Foot Locker	2016	2015	2014
Cost of Goods Sold	$4,907	$4,777	$4,372
Inventory	1,285	1,250	1,220
Finish Line
Cost of Goods Sold	$1,306	$1,237	$1,123
Inventory	377	343	304
DSW
Cost of Goods Sold	$1,852	$1,741	$1,629
Inventory	484	451	398

Answer 1

Inventory turnover ratio indicates number of times in a year inventory are converted into sales
Inventory turnover ratio	Cost of goods sold/Inventory
Calculation of inventory turnover ratio for Foot Locker
	2016	2015	2014
Cost of goods sold (a)	$4,907	$4,777	$4,372
Inventory (b)	$1,285	$1,250	$1,220
Inventory turnover ratio (a/b)	3.82	3.82	3.58
Calculation of inventory turnover ratio for Finish Line
	2016	2015	2014
Cost of goods sold (a)	$1,306	$1,237	$1,123
Inventory (b)	$377	$343	$304
Inventory turnover ratio (a/b)	3.46	3.61	3.69
Calculation of inventory turnover ratio for DSW
	2016	2015	2014
Cost of goods sold (a)	$1,852	$1,741	$1,629
Inventory (b)	$484	$451	$398
Inventory turnover ratio (a/b)	3.83	3.86	4.09
Summary
The inventory turnover ratio for each of the company is above 3 and has been decreasing for each company over three year period
Company DSW has the highest inventory turnover ratio for each year as compared to Finish line and foot locker
Inventory turnover ratio for locker has reduced in 2015 as compared to 2014 however in 2016 it has remained same.
Inventory turnover ratio for finish line has decreased from 3.69 in 2014 to 3.46 in 2016
Inventory turnover ratio for DSW has decreased from 4.09 in 2014 to 3.83 in 2016