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Analyze the financial statements for the last 5 years of two companies from different industries
Analyze the financial statements for the last 5 years of two companies from different industries. (E.g., a grocery chain and an electronic goods manufacturer.) Calculate their turnover ratios. Try to explain why their turnover ratios are different. Are there any trends apparent that can be explained?
Expert Solution
We are taking two companies Kimberly Clark (In Consumer industry) and Tesla ( In Automobile industry)
Turnover ration can be calculates using COGS / Average inventory
Kimberly Clark (Consumer Industry)
Inventory turnover 2019 = 12415 / 2263= 5.486
Inventory turnover 2018 = 12889 / 2164 = 5.956
Inventory turnover 2017 = 11,761 / 2035 = 5.779
Inventory turnover 2016 = 14,205 / 2175 = 6.531
Inventory turnover 2015 = 10,601 / 1935 = 5.478
Tesla ( Automobile industry)
Inventory turnover 2019 = 20509 / 1324= 15.4
Inventory turnover 2018 = 17419 / 949 = 18.35
Inventory turnover 2017 = 9536 / 723 = 13.18
Inventory turnover 2016 = 9850 / 714= 13.79
Inventory turnover 2015 = 11,761 / 825 = 14.255
It is observed that the turnover ratio in automotive industry is very high nearly 3 times in that of consumer goods. This is due to the fact that COGS are higher In automotive industry. As compared to the consumer industry the AR are fairly low.
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