Final answer:
To calculate the gross profit for Pound General Corporation with an inventory turnover ratio of 4.0 and fixed asset turnover ratio of 8.0, we first determine the COGS ($6,224 million) and sales revenue ($9,720 million). Subtracting COGS from sales revenue, we find that the gross profit is $3,496 million.
Step-by-step explanation:
The student has asked about calculating the gross profit of Pound General Corporation using the given financial ratios and inventory data. To compute the gross profit, we need to know the total sales revenue and the cost of goods sold (COGS). The inventory turnover ratio is the cost of goods sold divided by the average inventory, so with an inventory turnover ratio of 4.0 and average inventories of $1,556 million, we can calculate COGS as follows:
- COGS = Inventory Turnover Ratio × Average Inventories
- COGS = 4.0 × $1,556 million
- COGS = $6,224 million
Next, we use the fixed asset turnover ratio, which is sales revenue divided by average total fixed assets. With the fixed asset turnover ratio of 8.0 and average total fixed assets of $1,215 million, we get:
- Sales Revenue = Fixed Asset Turnover Ratio × Average Total Fixed Assets
- Sales Revenue = 8.0 × $1,215 million
- Sales Revenue = $9,720 million
Finally, the gross profit can be calculated by subtracting COGS from the sales revenue:
- Gross Profit = Sales Revenue - COGS
- Gross Profit = $9,720 million - $6,224 million
- Gross Profit = $3,496 million
Therefore, Pound General Corporation reported a gross profit of $3,496 million in the current year.