Question

Three companies that compete in the footwear marlet are Foot Locker, Finish Line, and DSW. The table below (pictured) 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 of dollars.

2014 2016 $4,906 1,287 2015 $4,780 1,247 $4,382 1,221 Foot Locker Cost of goods sold Inventory Finish Line Cost of goods sold Inventory DSW Cost of goods sold Inventory $1,247 $1,121 $1,320 374 346 301 $1,856 481 $1,750 447 $1,636 401

Answer 1

	Foot Locker
	Inventory Turnover Ratio	3.812	3.833	3.589
Findings for Foot Locker
1	Inventory Turnover ratio was 3.589 in year 2014
2	It increased in 2015 but again in 2016 it was a slight
	lesser than 2015
3	The Cost of goods sold has increased by 11.96% in year
	2016 from year 2014 , while the Inventory has increased
	by 5.41% from 2014 to 2016.
4	Increase in cost of goods sold is one of the factor that
	Inventory turnover is lesser than 2015.
5	Out of Foot Locker, Finish Line and DSW , Foot locker
	shows the better Inventory Management , where the
	Inventory Increase was by only 5.41% in comparison
	with 24.25% in Finish line and 19.95 % in DSW.

Finish Line
	Inventory Turnover Ratio	3.529	3.604	3.724
Findings for Finish line
1	In 2014 , it was the highest and then it started decreasing
	from 3.724 to 3.604 and then 3.529 in the year 2016
2	Inventory has increased by 24.25% while the Cost of
	goods sold has increased by 17.75% only. Hence the
	Inventory turnover is less than 2014 and 2015.
3	Need to examine the increase in Inventory

DSW
	Inventory Turnover Ratio	3.859	3.915	4.080
Findings for DSW
1	DSW and Finish line are having similar trend of Inventory
	Turnover.
2	DSW also the Inventory turnover was highest in 2014 then
	got decreased to 3.915 and then 3.859.
3	Inventory Increased by 19.95% while Cost of goods sold
	increased by only 13.45%.
4	This is similar reason to Finish line and this has impacted
	the Inventory Turnvoer ratio which decreased from
	4.080 to 3.859

The Inventory Turnover Ratio for Foot Locker for 2016 is 3.812

Working notes:

Inventory Turnover Ratio =		Cost of goods sold / Average Inventory
It shows that how many times the Inventory is rotated during the financial year.
Higher the ratio, better it is.
In the given case , since we don't have the figures of 2013 ,
we are unable to calculate the Average Inventory.
Hence, we are considering Inventory for year so as to
keep the same method for all the years and all the companies