Financial Management – Second Semester 2020-2021

Prof: Von Karlo G. Gabumpa, CPA

DO NOT PRINT OR REPRODUCE, FOR DISCUSSION PURPOSES ONLY

INVENTORY MANAGEMENT: (From Principles of Managerial Finance Textbook, Gitman)

Inventory Management
The first component of the cash conversion cycle is the average age of inventory. The objective for managing
inventory is to turn over inventory as quickly as possible without losing sales from stockouts. The financial
manager tends to act as an advisor in matters concerning inventory. He or she does not have direct control over
inventory but does provide input to the inventory management process.
Financial Management – Second Semester 2020-2021
Prof: Von Karlo G. Gabumpa, CPA
DO NOT PRINT OR REPRODUCE, FOR DISCUSSION PURPOSES ONLY

Common Techniques for Managing Inventory

ABC System
Financial Management – Second Semester 2020-2021
Prof: Von Karlo G. Gabumpa, CPA
DO NOT PRINT OR REPRODUCE, FOR DISCUSSION PURPOSES ONLY

Economic Order Quantity (EOQ) Model

Financial Management – Second Semester 2020-2021
Prof: Von Karlo G. Gabumpa, CPA
DO NOT PRINT OR REPRODUCE, FOR DISCUSSION PURPOSES ONLY

EXAMPLE:
Financial Management – Second Semester 2020-2021
Prof: Von Karlo G. Gabumpa, CPA
DO NOT PRINT OR REPRODUCE, FOR DISCUSSION PURPOSES ONLY

Just-In-Time (JIT) System

Financial Management – Second Semester 2020-2021
Prof: Von Karlo G. Gabumpa, CPA
DO NOT PRINT OR REPRODUCE, FOR DISCUSSION PURPOSES ONLY