Reference no: EM133065130

Question - Fancy Incorporated and Thrift Specialty both offer men's formal footwear. Thrift offers lower-to-middle priced footwear, whereas Fancy offers more specialized, higher-end footwear. The average price for a pair of shoes in Thrift may be about $40, whereas the average price in Fancy may be about $200. The types of shoes offered by Fancy are not sold by many other stores.

Suppose Thrift and Fancy report the following amounts for men's shoes in the same year (company names are disguised)

	Company 1	Company 2
Net sales	$120,000	$120,000
Cost of goods sold	46,000	80,000
Gross profit	$74,000	$40,000
Average inventory	$23,000	$20,000

Required -

1. For Company 1 and Company 2, calculate the inventory turnover ratio.

2. For Company 1 and Company 2, calculate the gross profit ratio.

3. After comparing the inventory turnover ratios and gross profit ratios, which company do you think is Thrift and which is Fancy?