Reading Financial Reports For Dummies, 3rd Edition

Chapter 15

Turning Up Clues in Turnover and Assets

In This Chapter

Comparing inventory valuation systems

Counting inventory turnover

Measuring fixed assets turnover

Assessing total asset turnover

Testing how well a company manages its assets is a critical step in measuring how effectively it uses its resources. Inventory is the most important asset for generating cash for any company that sells a product.

Many factors directly impact the cost of selling a product, including producing the product, purchasing the products or materials not produced in-house, storing the product until it's sold, and shipping the product to the customer or store where it's sold. And if a company doesn't sell its product fast enough, the product may become obsolete or damaged before it's sold.

In this chapter, I review the measures you can use to gauge how well a company manages its assets, especially its inventory, and how quickly the company sells the inventory.

Tracking inventory

Inventory-tracking methods for large corporations can be a highly honed science that involves extensive computer programming ...