Answer:
PepsiCo, Inc.
a) Computation of the Inventory Turnover:
= Cost of goods sold/Average Inventory
(in millions) 2015 2016 2017
= Cost of goods sold 18,038 20,351 20,099
/ Average Inventory $2,108 $2,406 $2,570
= 8.6 times 8.5 times 7.8 times
b) computation of the days in inventory:
= Days in the period/Inventory Turnover Ratio
(in millions) 2015 2016 2017
= Days in the period 365 365 365
/ Inventory Turnover Ratio 8.6 times 8.5 times 7.8 times
= 42 days 43 days 47 days
c) Computation of the Gross profit rate:
= Gross profit/Sales * 100
(in millions) 2015 2016 2017
Gross profit $21,436 $22,900 $23,142
/ Sales Revenue 39,474 43,251 43,232
= 54.3% 52.9% 53.5%
d) PepsiCo's inventory turnover reduced marginally from 2015 to 2017. The days in inventory fluctuated unsteadily just like the gross profit rate in the three years under review.
Explanation:
a) Data and Calculations:
(in millions) 2015 2016 2017
Beginning inventory $ 1,926 $ 2,290 $ 2,522
Ending inventory 2,290 2,522 2,618
Total Inventory 4,216 4,812 5,140
Average Inventory $2,108 $2,406 $2,570
Sales revenue 39,474 43,251 43,232
Cost of goods sold 18,038 20,351 20,099
Gross profit $21,436 $22,900 $23,142
PepsiCo's inventory turnover is a ratio that shows the frequency at which the company sells and replenishes its goods during an accounting period. It is calculated as the cost of goods sold divided by the average inventory.
PepsiCo's days in inventory indicates the number of days the company takes to sell its inventory. It is calculated as the number of days in the period, e.g. 365 days, divided by the inventory turnover ratio.
The Gross profit rate shows the relationship between the gross profit and the sales revenue. It is the percentage of sales revenue that covers the business expenses and from which net income is derived.
