Income Statement Balance Sheet
Gross Sales $4 003 450.00 Assets
Cost of Goods Sold – CoGS $920 793.50 Cash $706 034.00
Gross Margin $3 082 656.50 Accounts Receivable $355 450.00
Inventory $1 590 435.00
Transportation Costs $657 322.00 Net Current Assets $2 651 919.00
Warehousing Costs $901 000.00 Net Fixed Assets $803 056.00
Inventory Carry Costs $567 987.00 Total Assets $3 454 975.00
Other Operating Costs $345 876.00
Total Operating Costs $2 472 185.00 Liabilities
Current Liabilities $1 678 589.00
Profit before taxes (EBIT) $610 471.50 Long-Term Debt $398 060.00
Interest $110 000.00 $2 076 649.00
Taxes $69 000.00
Shareholders Equity $1 378 326.00
NET INCOME $431 471.50 Total Liabilities & Equities $3 454 975.00

According to Wisner et al, the financial impact of purchasing can be measured via its effect on Profit before taxes, Return on Assets (RoA) and Inventory Turnover. Based on the excel sheet provided:

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The financial impact of procurement_Excel Calculations sheet.xlsx

  1. Should the CoGs remain the same, calculate the inventory turnover ratio. Explain how inventory turnover ratio is calculated (formula)
  2. Should the CoGs remain the same, calculate the Return on Assets (RoA). Explain how Return of Assets (RoA) is calculated (formula)
  3. Should the CoGs be reduced by 20%, calculate the new inventory turnover ratio
  4. Should the CoGs be reduced by 20%, calculate the new Return on Assets (RoA).
  5. What actions can the purchaser take to improve the Cost of Goods Sold (CoGs). Ex. Outsourcing, etc

You can use the Income statement and balance sheet attached as support for the calculations, or you can do the calculations manually. The excel sheet does not have to be completed and returned.


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