Sparky's Sells Auto Parts -
Sparky's Forecasts That Sales Will Grow by 25

question 31

Multiple Choice

Sparky's sells auto parts. Provided below is selected financial information from the company's 2012 annual report:
$\begin{array}{lll}\underline{\text { Sparky's Selected Fimancial Statementdata }} \\\text { Fiscal year end } & \mathbf{2 0 1 2} & \mathbf{2 0 1 1} \\\text { (amounts in thousands of dollass) } & \\\text { Net sales } & \$ 125,410 & \$ 106,380 \\\text { Cost of GoodsSold } &-104,090 & -89,359 \\\text { GrossProfit } & \$ 21,320 & \$ 17,021\\\\\text { Inventory}& \$ 31,353 & \$ 30,850\end{array}$
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Sparky's forecasts that sales will grow by 25% in 2013 and that its cost of goods sold to sales ratio will be the same in 2013 as it was in 2012. If these assumptions prove correct and Sparky's inventory turnover ratio for 2013 is 4.5 what will be the level of inventory at the end of 2013?

• A) $31,353
• B) $38,320
• C) $40,000
• D) $42,314

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Definitions:

Foreclosure

The right of a mortgagee to apply to a court to have property sold when the mortgagor defaults or fails to perform some agreement in the mortgage.

Junior Mortgage

A mortgage subject to a prior mortgage.

Adjustable-Rate Mortgage

A mortgage loan with an interest rate that can fluctuate over time based on changes in a corresponding financial index that's attached to the loan.

Government Backing

Support or endorsement provided by a government, which can include financial guarantees, subsidies, or other forms of assistance.