EX 7-17 Inventory turnover and number of days’ sales in inventory
Kroger, Safeway Inc., and Winn-Dixie Stores Inc. are three grocery chains in the United States. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the following merchandise inventory information:
| Merchandise Inventory | ||
| End of Year (in millions) | Beginning of Year (in millions) | |
| Kroger | $4,859 | $4,855 |
| Safeway | 2,591 | 2,798 |
| Winn-Dixie | 665 | 649 |
The cost of goods sold for each company were:
| Cost of Goods Sold (in millions) | |
| Kroger | $58,564 |
| Safeway | 31,589 |
| Winn-Dixie | 5,269 |
a. Determine the number of days’ sales in inventory and inventory turnover for the three companies. Round to the nearest day and one decimal place.
b. Interpret your results in part (a).
c. If Winn-Dixie had Kroger’s number of days’ sales in inventory, how much additional cash flow (round to nearest million) would have been generated from the smaller inventory relative to its actual average inventory position?
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