Inventory Measures

Presentation by: Vandana Kaushik Roll no: A30601910013 Amity Global Business School MBA Batch 20102012

Content:
Introduction Inventory Types of Inventories Inventory Methods BOM/EOM Average Stock

Sales Turnover
Sell Through Stock to Sales Ratio

Weeks of Supply
Bibliography

Introduction - Inventory
Inventory is a current asset that represents goods

held for future sale in the ordinary course of business or use in the manufacture of goods for sale. Inventory is frequently the largest single component of a firms assets. Moreover, due to its nature, inventory is subject to ear, theft, and obsolescence and it is critical that firms properly manage and safeguard their inventory.

Types of Inventories

Merchandise Inventory
Goods acquired for resale

Manufacturing Inventory
Raw Materials Work-in-process Finished Goods

Inventory Methods
Perpetual Inventory System The inventory account is continuously updated as purchases and sales are made. Periodic Inventory System The inventory account is adjusted at the end of a reporting cycle.

BOM/EOM
BOM: The stock required to achieve the sales

during the month should ideally be present at the beginning of the month; therefore, the stock position refers to the beginning of month (BOM) stock level. As the sale progress through the month, the stock level drops, so that by the end of the month (EOM) the stock position could be expressed as (BOM stock sales).

Average Stock
The average value of stock during a financial year, calculated by adding together the values of the stock at the beginning and end of the Month and dividing by two.

Average Stock Average Stock (Month) = (Beginning of Month Inventory + End of Month Inventory) 2

SALES TURNOVER
SALES TURNOVER is the total amount sold within a stipulated time period, usually 12 months. Sales turnover is usually expressed in monetary terms but can also be in total units of stock or products sold.

Sell Through
Sell-through refers to a percentage of units

shipped which are actually sold. In the case of books, the rest is returned to the publisher. Other items, such as software, are usually discounted. Sell-through is always expressed as a percentage. Net sales essentially refers to the same thing, in absolute numbers. It also refers to sales made directly (Direct sales). Sell in, on the other hand, refers to sales made through a channel. Sell-Through Rate Sell-Through % = Units Sold Units Received

Stock to Sales Ratio

The stock to sales ratio is a way to determine the relationship between how much stock you have and how much youre selling. For example, if your stock to sales ratio is 5:1, youve got $100 worth of inventory for every $20 worth of merchandise you sell. Stock-to-Sales = Beginning of Month Stock Sales for the Month

Weeks Of Supply
A measures of how many weeks' worth of

inventory is in the system at a particular point in time. Weeks of supply tells the inventory manager how long the current on hand will last based on current sales demand.

Bibliography
http://www.investopedia.com/terms/i/inventory.asp

#axzz1pTQpY8GA http://lexicon.ft.com/Term?term=average-stock http://www.ventureline.com/accountingglossary/S/sales-turnover-definition/ http://retail.about.com/od/retailglossarys/g/sellthrough.htm http://theretailersadvantage.net/tag/stock-tosales-ratio/

Thank you !