Question

Comparative figures for Apple and Google follow. $ millions Inventory Cost of sales Current Year $ 4,855 141,048 Apple One Year Prior $ 2,132 131,376 Two Years Prior $ 2,349 140,089 Google Current One Year Two Years Year Prior Prior $ 749 $ 268 $ 491 45,583 35,138 28,164 Required: 1. Compute inventory turnover for each company for the most recent two years shown. 2. Compute days' sales in inventory for each company for the three years shown. 3. In the current year, does (a) Apple's and (b) Google's inventory turnover underperform or outperform the industry (assumed) average of 15?

Answer 1

1)	Average Inventory = (beginning inventory + ending inventory)/2
			Current Year	One Year Ago
	Apple		= ( $2132+4855)/2	= ( $2349+2132)/2
			= $ 3493.5	= $ 2240.5
	Google		= ( $268+749)/2	= ( $491+268)/2
			= $ 508.5	= $ 379.5
	Inventory Turnover Ratio = Cost of goods sold / average inventory
			Current Year	One Year Ago
	Apple		= $141048/3493.5	= $131376/2240.5
			=40.4times	=58.6 times
	Google		= $45583/508.5	= $35138/379.5
			=89.6 times	=92.6 times
2)	Days sales in inventory = 365/ inventory turnover ratio
			Current Year	One Year Ago
	Apple		= 365 days /40.4	= 365 days /58.6
			=9 days	=6.2 days
	Google		= 365 days /89.6	= 365 days /92.6
			=4.1 days	=3.9 days
3)	Apple	outperformed
	Google	outperformed
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