Chapter 6, Problem 4ADM

Hewlett-Packard and Apple: Inventory turnover and number of days’ sales in inventory

Hewlett-Packard Company (HP) and Apple Inc. are both developers and marketers of Computer equipment and peripherals. However, the two companies follow different manufacturing strategies. HP maintains a significant portion of its own manufacturing capabilities, while Apple outsources manufacturing to other companies. The following financial statement information is provided for both companies for a recent year (in millions):

	HP	Apple
Cost of goods sold	$73,726	$112,258
Inventories:
Beginning of year	6,046	1,764
End of year	6,415	2,111

A. Determine the inventory turnover for each company. (Round all calculations to one decimal place.)

B. Determine the number of days’ sales in inventory for each company. (Use 365 days and round all calculations to one decimal place.)

C. Interpret the difference between the ratios for the two companies.