Understanding Real World Financial Reports Essay
ATC 4-1Business Applications Case Understanding real-world annual reports Use the Topps Company’s annual report in Appendix B to answer the following questions What was Topps’ inventory turnover ratio and average days to sell inventory for 2006 and 2005? According to our text (Appendix B), inventory ratio is the amount of goods sold divided by the average inventory (Edmonds 184). In 2005, the net sales were $198,054 and in 2006, the total was $189,200.As for the inventory for 2005 the total amount was $36,781 and $32,936.
By dividing $198,054/$36,781 it gives the inventory ratio of 5. 74 for the year 2005. For 2006, dividing $189,200/$32,936 equals 5. 38.
Now, the ratio represents the average days it took to sell the product. Is the company’s management of inventory getting better or worse? After completing the equations for the inventory turnover ratio, it is clear that the company’s management has become worse.Not much but, the ratio is clearly lower in 2006 compared to 2005.
Higher returns resulted from a softer Italian entertainment market and WizKid’s expansion into new products and markets. Increased royalty costs driven by the higher mix of royalty-bearing U. S. sports sales and an increase in the effective royalty rate on Premier League products due to lower sales, also put pressure on gross profit margins.
(Edmonds 623) What cost flow method(s) did Topps use to account for inventory?Cost flow methods for Topps’ consist of a first in, first out basis. Since Topps’ consist of confectionaries (candy, gum etc. ) doing inventory this way is more effective. First in, first out method requires that the cost of items consumed must first be assigned to the cost of products that were sold.REFERENCESEdmonds, Thomas.
Survey of Accounting, 2nd Edition, 2nd Edition. McGraw-Hill Primis Custom Publishing. <vbk:0390124117#page(184)>.