Question

Suppose this information is available for PepsiCo, Inc. for 2020, 2021, and 2022. (in millions) 2020 2021 2022 Beginning inventory $1,926 $2,290 $2,522 Ending inventory 2,290 2,522 2,618 Cost of goods sold 18,038 20,351 20,099 Sales revenue 39,474 43,251 43,232 (a) Calculate the inventory turnover for 2020, 2021, and 2022. (Round answers to 1 decimal place, e.g. 52.7.) 2020 2021 2022 Inventory turnover $enter inventory turnover in dollars $enter inventory turnover in dollars $enter inventory turnover in dollars

Answer 1

The inventory turnover in:

2020 is 8.6

2021 is 8.5

2022 is 7.8

An inventory turnover ratio is a ratio that is used to determine the amount of times that a firm sells and replaces its inventory in a given period. Inventory turnover is an activity ratio.  Activity ratios determine the degree of efficiency with which a firm carries out its daily task.

Inventory turnover = cost of goods sold / average inventory

Average inventory = (beginning inventory + ending inventory) / 2

Inventory Turnover in 2020

Average inventory = ($1,926 + 2,290) / 2 = $2,108

Inventory turnover = 18,038 / $2,108 = 8.6

Inventory Turnover in 2021

Average inventory = ($2,290 + 2,522) / 2 = $2,406

Inventory turnover = 20,351 / $2,406 = 8.5

Inventory Turnover in 2022

Average inventory = ($2,522 + 2,618) / 2 = $2,570

Inventory turnover = 20,099 /  $2,570 = 7.8

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