Below is financial information for two restaurant retailers

Below is financial information for two restaurant retailers. Popper’s Company operates an innovative retail bakery-cafe business and franchising business. At the end 2010, Popper’s had 132 company-owned and 346 franchise-operated bakery-cafes. Popper’s located most of their unique bakery-cafe concept stores in suburban, strip mall, and regional mall locations. As a first mover in this concept, the company operates in 32 states. Simmer Corporation began operations five years earlier than Popper’s and purchases and roasts whole bean coffees and sells them, along with numerous coffee drinks and related products at over 2,900 Company-operated retail stores.

Selected Data for Popper’s Company and Simmer Corporation

(amounts in millions)

?

Simmer

Popper’s

Net Sales

Sales Simmer $5,000 Popper’s 300

$4,076

$278

Cost of Goods Sold

1,686

97

Interest Expense

0

0

Net Income

268

22

Average Inventory

303

4

Average Fixed Assets

2,163

130

Required:

a.

Compute the Inventory turnover, fixed asset turnover, and accounts receivable turnover.

b.

Describe the likely reasons for the difference in the accounts receivable turnover and the inventory turnover

?	Simmer	Popper’s
Net Sales Sales Simmer $5,000 Popper’s 300	$4,076	$278
Cost of Goods Sold	1,686	97
Interest Expense	0	0
Net Income	268	22
Average Inventory	303	4
Average Fixed Assets	2,163	130

Solution

Inventory Turnover Ratio = Cost of Goods sold/Average Inventory Simmer = 1686/303 = 5.6 Popper = 97/4 = 24.3 Fixed Asset Turnover = Sales/Fixed assets Simmer = 5000/2163 = 2.3 Popper = 300/130 = 2.3 Popper has higher inventory turnover ratio which may be due to good location of its stores that ensures quick sales of its products