Problem

A recent annual report of  Gateway, Inc., reveals the following information (dollar amount...

A recent annual report of  Gateway, Inc., reveals the following information (dollar amounts are stated in millions):

Cost of goods sold

$7,542

inventory (beginning of year)

              193

Inventory (end of year)

315

Average time required to collect accounts receivable

22 days

a. Compute Gateway’s inventory turnover rate for the year (round to nearest tenth).


b. Compute the number of days required by Gateway  to sell its average inventory (round to the nearest day).


c. What is the length of Gateway’s operating cycle?


d. Gateway’s inventory turnover rate is much higher than the inventory turnover of a retail computer business such as CompUSA. Explain why.

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