Question

Suppose this information is available for PepsiCo, Inc. for 2020, 2021, and 2022. (in millions) 2020 2021 2022 Beginning inventory $1,700 $2,200 $2,500 Ending inventory 2,200 2,500 2,600 Cost of goods sold 14,235 16,920 16,575 Sales revenue 40,100 45,000 44,920 Calculate the inventory turnover for 2020, 2021, and 2022. (Round inventory turnover to 1 decimal place, e.g. 5.1.) 2020 2021 2022 Inventory turnover enter an inventory turnover times enter an inventory turnover times enter an inventory turnover times LINK TO TEXT Calculate the days in inventory for 2020, 2021, and 2022. (Round days in inventory to 1 decimal place, e.g. 5.1.) 2020 2021 2022 Days in inventory enter a number of days days enter a number of days days enter a number of days days LINK TO TEXT Calculate the gross profit rate for 2020, 2021, and 2022. (Round gross profit rate to 1 decimal place, e.g. 5.1%.) 2020 2021 2022 Gross profit rate enter percentages % enter percentages % enter percentages %

Answer 1

Answer:

a.  The inventory turnover are as follows:

Inventory turnover for 2020 = 7.3

Inventory turnover for 2021 = 7.2

Inventory turnover for 2022 = 6.5

b. The days in inventory are as follows:

Days in inventory for 2020 = 50.0  

Days in inventory for 2021 = 50.7

Days in inventory for 2020 = 56.2

c. The gross profit rates are as follows

Gross profit rate for 2020 = 64.5%

Gross profit rate for 2021 = 62.4%

Gross profit rate for 2022 = 63.1%

Explanation:

Note: The merged data given in the question are first sorted as follows:

(in millions)                         2020          2021          2022

Beginning inventory          $1,700      $2,200      $2,500

Ending inventory                 2,200        2,500        2,600

Cost of goods sold            14,235       16,920        16,575

Sales revenue                   40,100       45,000      44,920

The explanation to the answers is now given as follows:

a. Calculate the inventory turnover for 2020, 2021, and 2022. (Round inventory turnover to 1 decimal place, e.g. 5.1.)

Note: See the attached excel file for the calculation of the inventory turnover for 2020, 2021, and 2022.

In the attached excel file, the following formula is used to calculate the inventory turnover for 2020, 2021, and 2022:

Inventory turnover = Cost of goods sold / ((Beginning inventory + Ending inventory) / 2)

Note that under financial ratio analysis; (Beginning inventory + Ending inventory) / 2 = Average inventory

b. Calculate the days in inventory for 2020, 2021, and 2022. (Round days in inventory to 1 decimal place, e.g. 5.1.)

Note: See the attached excel file for the calculation of days in inventory for 2020, 2021, and 2022.

In the attached excel file, the following formula is used to calculate the days in inventory for 2020, 2021, and 2022:

Days in inventory = 365 / Inventory turnover

c. Calculate the gross profit rate for 2020, 2021, and 2022. (Round gross profit rate to 1 decimal place, e.g. 5.1%.).

Note: See the attached excel file for the calculation of gross profit rate for 2020, 2021, and 2022.

In the attached excel file, the following formula is used to calculate the gross profit rate for 2020, 2021, and 2022:

Gross profit rate = (Sales revenue - Cost of goods sold) / Sales revenue

Note that under financial ratio analysis; Sales revenue - Cost of goods sold = Gross profit