Year 12 IB Extended Essays 2017

Correlation Between Number of Stores and Inventory Balance

Growth in Store Network 2013 – 2016 | McGrathNicol

Graph 1: Inventory Balance 2013 – 2016 | McGrathNicol

Analysis of Correlation between Number of Stores and Inventory Balance

The number of Dick Smith stores between the years 2013 to 2016 increased by 66 stores across

Australia and New Zealand. During this same period, it can be seen in Graph 1 that the average

monthly inventory balance also grew by $65m when comparing the month July 2013 and 2015,

thus verifying the fact that the growth of stores during the expansion period had a direct

correlation on the inventory balance of the Dick Smith Group. Furthermore, this establishes a

strong and valid point that due to the $82m investment into increased stores and the immediate

increase in stock Dick Smith suffered liquidity issues as shown in the Current and Acid Ratio’s

above.

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