WendyEller2-WebFieldTrip-Unit9.doc - can not afford to turn...

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Class, In our web field trip this week, we were asked to examine the financial statements of Amazon.com and evaluate their inventory turnovers, based on the website of Effective Inventory Management, Inc. We are then asked to answer the following questions: 1) What is Amazon’s inventory turnover? I found that Amazon had the following turnovers for each of these years. a. Year 2007 Turnover 13 b. Year 2006 Turnover 13 This is figured by: Cost of Goods (from stock sales the last 12 months)/Average Inventory Investment (during the last 12 months) 2) Is this turnover what you would expect from a company who sells merchandise only online? Actually, I do expect this inventory turnover for Amazon, even if they are an online only merchandiser. They generally have a lower gross margin, which requires a higher turnover. They
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Unformatted text preview: can not afford to turn inventory less often due to their lower gross margins. 3) Is Amazons turnover favorable or unfavorable, based on what we read in the article on inventory turnover? This may be unfavorable because the article states that lower gross margins require higher turnovers. Those with higher gross margins are able to afford to turn their inventory less often. This tells me that Amazon is not in a good gross margin compared to some other companies. However, it may also be favorable because the more inventory turnovers, the less the cost of investment in inventory. This saves that extra money that can be used for something else in the company. Wendy Eller...
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This note was uploaded on 12/08/2009 for the course AC114 AC114 taught by Professor Duchac during the Fall '09 term at Kaplan University.

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