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Manufacturing Inventory Turnover Ratios

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Tractor Supply Company has been in operation for more than seventy-five years. During this time, it has specialized in a market that no other company has succeeded in as they have. Being in a unique market makes it difficult to compare them to any other retailers financially. Looking at their financial ratios allows us to have a better understanding of have financially secure they are. Comparing one year to the next is one way of knowing if they are growing financially or declining. Since their financial ratios are good indicators of being strong and their liquidity ratios have increased from the previous year, there are areas the need to be worked on but they are headed in the right direction. Charles E. Schmidt Sr. founded Tractor Supply …show more content…

The higher the ratio, the more times the inventory was sold. Typically, this means the more money that the company was able to make. Tractor Supply Company reported their cost of goods sold to be $4,083,333,000 and their average inventory was $1,199,912,500. This gives them a ratio of 3.40. On average, their inventory was acquired and sold 3.4 times in the year. It took an average of 107 days for their inventory to sell. This was a slight decrease from the previous year, which was 108 days or 3.37 (Libby et al., 2011). The return on equity ratio is used to show how much money the stockholders earn on their investments. They expect to make more money if they invest more money. This is computed by taking the net income and dividing it by the average stockholders’ equity. They reported a net income of $410,395,000 and the average stockholders’ equity is $1,343,427,500. When calculated, the return on equity ratio is 31 percent. The previous year return on equity was 29 percent. This increase indicates that the money invested did indeed increase the profit of the stockholders (Libby et al., …show more content…

Most areas appear to be going in the right direction, but some areas still need to be improved on. The cash ratio is still low and needs to be brought up. Having a little more cash on hand would be helpful in the event that the economy took a downward turn. Creditors are still expecting to be paid whether they have the cash to pay them or not. One way to do this would be increasing the inventory turnover. This would generate cash at a faster rate, therefore increasing the cash on hand. This would also bring up the quick ratio to where it needs to be. The increase in debt-to-equity is a little concerning. This ratio increased from 57 cents to 70 cents. The cause for concern is that they are becoming more dependent on creditors. If more of the stockholders’ equity was used to offset the difference, this might bring the debt-to-equity back down. The current price of their stock is $74.25. Over the last five years, the price of their stock on average has been going up. Ultimately, I believe Tractor Supply Company to be strong financially and a good long-term

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I would focus on the current and debt to asset ratio. Boot Barn current ratio was very good, but I would focus on the ability to lower the current liabilities. I would focus on paying the current liabilities off and as often as possible which in turn would improve the current ratio. I would also sell off any unproductive asset that is not bringing value added money which would improve the current ratio. This would allow little more inventory on hand which then we could investigate the sales of that product.

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In this case, CanGo is not performing well because a high Debt to Equity Ratio generally means that a company has been aggressive in financing its growth with debt. Debt includes things such as stocks, bonds, and loans that the company borrowed against. CanGo’s Current Ratio is 5.38 and Amazon’s Current Ratio is 1.33. CanGo is performing well in this area compared with its primary competitor because this ratio shows that CanGo is more than capable of repaying its debits and liabilities. The higher the current ratio, the more capable the company is of paying its obligations.

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There is less outstanding equity in the firm and it caused the return on equity to increase. It will also help the price to earning ration to go down, which means that it becomes less expensive investments. We believe that the best solution is for AutoZone to repurchase some of the stock because it can change the amount of stock it repurchases every year. One year it can repurchase a lot of stock back and then the next year it can repurchase just a little and it is more flexible than paying dividend. It is better than paying dividend because the dividend is expected to increase every year or to remain steady year to year.

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We believe this is an important ratio to apply because it gives a clear understanding of where their profits are, which affects all business decisions. Higher profit is ultimately better for shareholders and Best Buy’s ratio is comparable to other retail companies, making it a good company to invest in. Additionally, their return on assets (ROA) was 0.0897. While this may seem low, Best Buy is a retail-based company and most retail companies have a low ROA. Best Buy’s ROA is comparable to other retail companies, and better than most, making it a good company to invest

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Return on Equity increased from 10.98% to 15.39%, showing that the firm is more profitable than before. Earnings per Share increased as well, as there were less shares outstanding with the repurchase while net income was unaffected. EPS increased from $0.91 to $1.04, another indicator that the leverage increased profitability. With the repurchase, Blaine’s D/E ratio increased, going from not having any debt at all to a D/E ratio of 11.48%, which is more inline with industry competitors. PE ratio fell as a result of the leverage.

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has a return on equity (ROE) of -75.31% in 2015, -9.04% in 2016 and -25.72% in the year 2017. This ratio shows that the business has been performing poorly and posting losses in the period under review. Apple Inc. had an ROE of 44.74% in the year 2015, 35.62% in the year 2046 and 36.07% in the year 2017. These ratios show that the company is posting profits from one year to the other. However, there is need to reassess the profits as they are decreasing slightly.

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