Answer :
Final Answer:
In 2024, Forever 21's inventory turnover is 7.2 times, with 50.7 days in inventory and a gross profit rate of 42.5%. In 2025, the inventory turnover increases to 8.4 times, with 43.4 days in inventory, and a gross profit rate of 46.2%.
Explanation:
Forever 21's inventory turnover is calculated by dividing the cost of goods sold by the average inventory. In 2024, the cost of goods sold was $720 million, and the average inventory was $100 million, resulting in a turnover of 7.2 times (720/100 = 7.2).
The days in inventory are determined by dividing 365 days by the inventory turnover. Hence, 365/7.2 = 50.7 days. The gross profit rate is calculated by dividing the gross profit by net sales, which equals ($1.2 billion - $720 million) / $1.7 billion = 42.5%.
Similarly, in 2025, the cost of goods sold is $780 million, and the average inventory is $93 million, resulting in an inventory turnover of 8.4 times (780/93 = 8.4). The days in inventory are 365/8.4 = 43.4 days.
The gross profit rate is ($1.25 billion - $780 million) / $1.8 billion = 46.2%. These metrics indicate that Forever 21 is managing its inventory more efficiently in 2025 compared to 2024, as evidenced by the higher turnover rate and lower days in inventory, leading to an improved gross profit rate.
