Chapter 6, Problem 6.65AP

(Learning Objective 4: Compute and evaluate gross margin and inventory turnover) Crispy Donut, Inc., and Calhoun Coffee Corporation are both specialty food chains. The two companies reported these figures, in millions:

A	B	C
Crispy Donut, Inc. Income Statements (Adapted) Years Ended December 31
(Amounts in millions)	2018	2017
Revenues:
Net sales	$ 600	$ 710
Costs and Expenses:
Cost of goods sold	540	602
Selling, general, and administrative expenses	64	53

A	B	C
Crispy Donut, Inc. Balance Sheets (Adapted) December 31
(Amounts in millions)	2018	2017
Assets
Current assets
Cash and cash equivalents	$ 13	$ 29
Receivables	23	38
Inventories	15	25
8

Requirements

  1.    Compute the gross margin percentage and the rate of inventory turnover for Crispy Donut and Calhoun Coffee for 2018.

  2.    Based on the these statistics, which company looks more profitable? Why?