4 17 calculating and interpreting inventory turnover ratios dell produces computer 383906

4.17 Calculating and interpreting inventory turnover ratios. Dell produces computers and related equipment on a made to order basis for consumers and business. Sun Microsystems design and manufactures higher end computers that function as servers and for use in computer aided design. Sun Microsystems sells primarily to business. It also provides services to business customers in addition to product sales of computers. Selected data for each firm for 2007 2009 appear in Exhibit 4.23. (Dells fiscal year end is in January; Suns fiscal year end is in June. As of the writing of this text, an acquisition of Sun by Oracle is pending.) Exhibit 4.23 Selected Data for Dell and Sun Microsystems (amounts in millions) Problem 4.17) 2009 2008 2007 Dell Cost of goods Sold $49,375 $48,855 $47,433 Average Inventories 1,024 920 618 Change in sales from previous year 1.10% 3.00% 4.10% Sun Microsystems Cost of goods Sold $5,948 $6,639 $6,778 Average Inventories 623 602 532 Change in sales from previous year 10.40% 2.10% 3.70% a. Calculate the inventory turnover ratio for each firm for 2007 2009 b. Suggest reasons for the differences in the inventory turnover ratios of these two firms. c. Suggest reasons for the changes in the inventory turnover ratios during the three year period.