California Pizza Kitchen opened its first restaurant in Beverly Hills in 1985. Almost immediately after the first location opened, it expanded from California to more than 250 locations in more than 30 states and 11 countries. California Pizza Kitchen completed an initial public offering in August 2000. Several years ago, Golden Gate Capital completed the acquisition of California Pizza Kitchen and, as a result of the acquisition, the company's common stock is no longer publicly traded.
Required:
(b) Does California Pizza Kitchen's inventory turnover ratio seem reasonable to you?
Answer:
Calculate inventory turnover ratio for year 2 and 3.
Particulars Year 3 Year 2
Cost of goods sold (A) 528,285 543,504
Average inventory (B) 5,827 5,557
Inventory turnover ratio (A + B) 90.66 97.81
The Inventory turnover ratio is decreased for year 3 with comparison from year Decreasing Inventory turnover ratio shows that inventory is taking a long time to convert into cash and completing the business cycle. Hence, it is needed to improve sales and collections efficiency.
Inventory turnover ratio is the rate that inventory stock is bought, or used, and replaced. The Inventory turnover ratio is calculated via dividing the value of goods by way of common stock for the identical period. A higher ratio tends to point to sturdy sales and a decrease one to susceptible sales.
How do you calculate Inventory turnover ratio?
Inventory turnover ratio = price of products offered * 2 / (beginning inventory + final inventory)
What does an Inventory turnover ratio of 1.5 imply?
If the fee of products sold become $3 million, the inventory turnover ratio could be 1.five. The better the Inventory turnover ratio, the higher. while the ratio is high, it approach that you're capable of sell items fast. A low ratio suggests vulnerable income.
What is a good inventory turnover ratio for retail?
The more inventory turnover ratio you keep, the more you lessen the opportunity to sell exclusive products, and your competition may additionally promote them. In maximum instances, a very good turnover ratio in retail is between 2 and 4.
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