Question

The following information is available for Gildan Activewear Inc., headquartered in Montreal, for three recent fiscal years (in US. $ thousands) 2016 2014 2015 Inventory 851,033 $779,407 $595.794 Net sales 2,959,238 2,359,994 2.284,303 Cost of goods sold 2,229,130 1701,311 1,550,266 Part 1 Calculate the inventory turnover, days in inventory.and gross profit margin for 2016 and 2015, (Round inventory turnover and current ratio to 1 decimal place, eg. 15.2. Round days in inventory to nearest day. Use 365 days for calculation.) Gross Profht Margin Days In Inventory Inventory Turnover days 2016 times days 2015 times

Answer 1

1.

For 2015

Average inventory = (Beginning inventory + Ending inventory)/2

= (595,794 + 779,407)/2

= $687,600.5

Inventory turnover = Cost of goods sold/Average inventory

= 1,701,311/687,600.5

= 2.5 times

Days in inventory = 365/Inventory turnover ratio

= 365/2.5

= 146 days

Gross profit = Net sales - Cost of goods sold

= 2,359,994 - 1,701,311

= $658,683

Gross profit margin = Gross profit/Sales

= 658,683/2,359,994

= 27.9%

For 2016

Average inventory = (Beginning inventory + Ending inventory)/2

= (779,407 + 851,033)/2

= $815,220

Inventory turnover = Cost of goods sold/Average inventory

= 2,229,130/815,220

= 2.7 times

Days in inventory = 365/Inventory turnover ratio

= 365/2.7

= 135 days

Gross profit = Net sales - Cost of goods sold

= 2,959,238 - 2,229,130

= $730,108

Gross profit margin = Gross profit/Sales

= 730,108/2,959,238

= 24.7%

2.

In the year 2016, Gross profit ratio has decreased which shows that profitability has deteriorated in the year 2016.

In the year 2016, inventory turnover ratio has increased and days in inventory has decreased as compared to the year 2015, thus liquidity has improved in the year 2016.

Kindly comment if you need further assistance. Thanks