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Autor: sshugrue • September 21, 2010 • 362 Words (2 Pages) • 1,178 Views
We decided to group all the retail companies together by understanding that a retail company will have a relatively low collection period and then break them down further based upon our knowledge and research of industry averages.
We believe that the Department store is represented by column A. The first aspect that caught our attention was the fact that there was a decent amount of inventory, which makes sense because a department store will need to have a continuous flow of inventory in order to make sure the most current goods are being represented on the shelf, while the older items get cycled out. Also, column A had a relatively low inventory turnover due to the fact that it will only completely sell its inventory a select amount of times a year. This will be sold to either the customers of the store or to different closeout stores, such as Big Lots, who will buy the goods at a discounted price and sell them for a cheaper price to customers. Another aspect of column A is the fact that the collection period is 12 days. This is due to the fact that they issue their own charge card, which is most likely billed at the end of every month. So averaging the people who pay with cash or their debit card with the people who use the charge card or their credit card will result in the collection period of 12 days.
After doing some research we concluded that the online book company would have the balance sheet and financial data of column K. An online bookseller will have low cash and marketable securities because all transactions will be done online and most likely with a credit card. Also, they will need to have a large inventory in order to keep up with the demand of the customers and to make sure their selection of books is vast enough to stay competitive in the market. Having a high accounts payable is congruent with having a large inventory because the company will have to borrow money to support their inventory.