Corporate Financial Accounting 14th Edition by Carl Warren,James Reeve,Jonathan Duchac

Exercise 13

Inventory analysis
QT, Inc. and Elppa Computer, Inc. computer with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions):

A. Determine for both companies (1) the inventory turnover and (2) the number of days' sales in inventory. (Round to one decimal place.)
B. Interpret the inventory ratios in the context of both companies' operating strategies.