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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