Performing ratio analysis using real world data
Ruby Tuesday’s, Inc., operated 834 casual dining restaurants across the United States as of June 5, 2007. As of July 31, 2007, Zale Corporation operated 1,471 retail jewelry stores and 793 kiosks throughout the United States, Canada, and Puerto Rico. The following data were taken from these companies’ 2007 annual reports. All dollar amounts are in thousands.
|
Ruby Tuesday’s |
Zale Corporation |
|
|
June 5, 2007 |
July 31, 2007 |
|
|
Sales |
$1,395,212* |
$2,437,075 |
|
Cost of Goods Sold |
375,836 |
1,187,601 |
|
Net Income |
91,668 |
59,252 |
|
Merchandise Inventory |
11,825 |
1,021,164 |
Required
a. Before performing any calculations, speculate as to which company will take the longest to sell its inventory. Explain the rationale for your decision.
b. Calculate the inventory turnover ratios for Ruby Tuesday’s and Zale Corporation.
c. Calculate the average days to sell inventory for Ruby Tuesday’s and Zale Corporation.
d. Do the calculations from Requirements b and c confirm your speculations in Requirement a?