Questions:
Amazon had sales of $1,389,900 million with cost of sales of 75% in 2023. Moreover, its inventory in 2023 was $253,999 million and $234,975 million in 2022. What is Amazon's inventory turnover?

Walmart had sales of $2,859,485 million with the cost of sales of 65% in 2023. Moreover, its inventory in 2023 was $34,999 million and in 2022 it was $40,838 million. 

Based on these numbers, is it more likely that Walmart or Amazon has a higher relative investment in inventories?

Reference answers:
Inventory turnover = Cost of sales / average inventory in the year

# Amazon

Inventory turnover = Cost of sales / average inventory in the year

Cost of sales = 75% of 1,389,900 = 1,042,425

Average inventory = 1/2 *($253,999 + $234,975) = 244487

Inventory turnover = $1042425 / $244487 = 4.26

Amazon's inventory turnover is 4.26

The inventory turnover ratio can be used to find out which one of them has the highest relative investment in inventories as it will help find out how often the company uses its inventory to generate sales.

# Walmart

Inventory turnover = Cost of sales / average inventory in the year

Cost of sales = 65% of 2,859,485 = 1,858,665.25

Average inventory = 1/2 *($40838 + $34999) = 37918.5

Inventory turnover = $1858665.25 / $37918.5 = 49.02



Walmart has a higher inventory turnover, which means that it utilizes its inventory more frequently and therefore has lower relative investment compared to Amazon