Question

I was provided both the Balance Sheet and Statement of income from which I am supposed to calculate the inventory turnover ratio. But the balance sheet only has the inventory values for 2016 and 2015, while the statement of income only states the cost of sales for 2015, 2014, and 2013.

So:

Merchandise inventory (from balance sheet):

January 30, 2016 = $5,506

January 31, 2015 = $5,417

Cost of Sales (from income statement):

2015 = $16,496

2014 = $16,863

2013 = $16,725

Usually the turnover ratio would, for example, be: (2016 cost of sales)/(average of 2016 inventory and 2015 inventory)

But the cost of sales for 2016 isnt provided, and if I were to use cost of sales for 2015, the 2014 inventory isn't provided.

MACY'S, INC. CONSOLIDATED BALANCE SHEETS (millions) January 30, 2016 January 31, 2015 $ $ 1,109 558 5,506 479 7,652 7,616 3,897 514 2,246 424 5,417 493 8,580 7,800 3,743 496 711 21,330 897 20,576 $ $ ASSETS Current Assets: Cash and cash equivalents Receivables Merchandise inventories Prepaid expenses and other current assets Total Current Assets Property and Equipment - net Goodwill Other Intangible Assets - net Other Assets Total Assets LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term debt Merchandise accounts payable Accounts payable and accrued liabilities Income taxes Total Current Liabilities Long-Term Debt Deferred Income Taxes Other Liabilities Shareholders' Equity: Common stock (310.3 and 340.6 shares outstanding) Additional paid-in capital Accumulated equity Treasury stock Accumulated other comprehensive loss Total Macy's, Inc. Shareholders' Equity Noncontrolling interest Total Shareholders' Equity Total Liabilities and Shareholders' Equity 642 1,526 3,333 227 5,728 6,995 1,477 2,123 76 1,594 3,109 296 5,075 7,233 1,443 2,201 3 621 6,334 (1,665) (1,043) 4,250 3 4.253 20,576 1,048 7,340 (1,942) (1,072) 5,378 5,378 21,330 $

Answer 1

Answer:

Financial year of Macy's Inc. may be from Jan 31 to Jan 30 next year.

Hence Income statement for 2015 means income statement for period from Jan 31, 2015 to Jan 30, 2016.

The beginning and ending inventory values for this period are also given.

As such you can calculate inventory turnover ratio for 2015 by using cost of sales for 2015 (from Jan 31, 2015 to Jan 30, 2016) and beginning inventory as of Jan 31,2015 of $5,417 and ending inventory as of January 30, 2016 of $5,506

Hence:

Inventory Turnover ration for 2015 = 16496 / ((5417 + 5506) / 2) = 3.02