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Inventory Turns Method

Posted:
Mon May 15, 2000 5:11 pm
by rmurrey@dantel.com
Our CFO uses the last quarter of each year and annualizes the data for inventory turns. (i.e., 4th quater COGS divided by ending inventory) My concern is that since our sales varies significantly by quater this is not a true indication of our annual turns. Comments?
Inventory Turns Method

Posted:
Mon May 15, 2000 7:49 pm
by Chuck Hartle
Hi rmurrey,
You might consider this. Take your inventory cost for the quarter, divide that by three months, then multiply that by 12 to calculate your inventory investment annualized based on the quarter.
Then at least you can compare your cost of goods sold for the same investment during the exact same time period.
Chuck Hartle'
Inventory Turns Method

Posted:
Tue May 16, 2000 11:43 am
by Gary J. Naples
Hi rmurrey,
Your concern about the length of time your CFO uses for the calculation is justified. A minimum of six months Cost of Sales is required to establish a valid basis for calculating turnover. A quarter is really not enough data.
Gary J. Naples
Inventory Turns Method

Posted:
Tue May 16, 2000 4:33 pm
by RICHLOWE
we use a rolling 12 month system that seems more fair. the peaks and valleys are somewhat smoothed out. however, to accurately find numbers, a agree that taking the quarter divided by three times twelve would be sufficient.