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inventory turnover, Finance Basics

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You are the financial accountant of Donald Bhd, a manufacturer and wholesaler of soft drinks. Donald Bhd is in direct competition with Fizz Bhd and Pop Bhd.

The finance director has informed you that the board of directors are considering purchasing an interest in one of their two competitors in order to increase market share. This decision will be based on forward-looking market and management information. However, the directors seek to use data from recent corporate reports to construct the necessary estimates and forecasts leading to their decision.

The finance director has provided you with the following table of statistics calculated from the most recent financial statements of both competitors.

Fizz Bhd Pop Bhd
Gross profit margin 40% 40%
Net profit margin 15% 10%
Inventories turnover 8 times 4 times
Receivable days 63 days 40 days
Payable days 65 days 65 days
Current ratio 1.25:1 1.75:1
Liquid ratio 0.9:1 1:1
Asset turnover 1.5 times 2 times

Required:

Using the above information, prepare a report for the board of directors’ comparing the results and the financial situation of the two competitors
um 100 words accepted#

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