Chapter 6, Problem 6.1ADM

Continuing Company Analysis—Amazon: Inventory turnover and number of days’ sales in inventory

Amazon.com, Inc. is one of the largest Internet retailers in the world. Target Corporation is one of the largest value-priced general merchandisers operating in the United States. Target sells through nearly 1,800 brick-and-mortar stores and through the Internet. Amazon and Target compete for customers across a wide variety of products, including media, general merchandise, apparel, and consumer electronics. Cost of goods sold and inventory information from a recent annual report are provided for both companies as follows (in millions):

	Amazon	Target
Cost of goods sold	$62,752	$51,160
Inventories:
Beginning of year	7,411	7,903
End of year	8,299	8,766

A. Compute the inventory turnover for both companies. (Round all calculations to one decimal place.)

B. Compute the number of days’ sales in inventory for both companies. (Use 365 days and round all calculations to one decimal place.)

C. Which company has the better inventory efficiency?

D. What might explain the difference in inventory efficiency between the two companies?