Guys, I can’t seem to figure this one out… An analyst gathered the following info for four companies operating in the same industry during the same year: Company A: Avg Inv (millions): $2 Sales (millions: $25 Avg Inv Processing Period: 60 Company B: Avg Inv (millions): $2 Sales (millions: $26 Avg Inv Processing Period: 70 Company C: Avg Inv (millions): $2.5 Sales (millions: $28 Avg Inv Processing Period: 60 Company D: Avg Inv (millions): $2.5 Sales (millions: $29 Avg Inv Processing Period: 70 Which company most likely achieved the highest gross profit margin for the year? Pls explain your logic. Thanks.
just at prima facie, you should be looking to find COGS (from the inventory processing period, get the inventory turnover, and the inventory turnover = COGS / inventories) once you have COGS and you know the sales figures, you can get the gross profit margin
Use the Inv Processing Period and Inv to find COGS Then Subtract COGS from Sales To Find Gross Profit and Margin A 25 - 365/60 * 2 = 12.83
Thanks Guys.