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What is an inventory Turnover

What is an inventory Turnover? Inventory Turnover Ratios

 

Inventory Turnover is a financial measure that indicates how often a company has sold and exchanged assets over a given period of time. The company may divide the days into periods by inventory profit formula to calculate the number of days it takes to sell a handy list.

 

Analyzing Inventory Ratios

 

Inventory Turnover

 

The value of an asset primarily means or informs the company about its pricing strategies and the supplier’s relationship with the product life cycle and promotions, so it is important for the company to know in any way that its sales and that will change to inform the company how the ship will ship. . According to Fernando (2021), the value of an asset is primarily a financial measure that indicates how often a company has sold and changed its list of names over a period of time. Calculating an organization’s profit margin is important as it helps it make better decisions about marketing, production, pricing, and purchasing new lists.

 

If you look at the data of both companies, Coca-Cola and Pepsi, for the quarter ended September 2021, the inventory profit was 1.23 (Coca-Cola, 2019) and 2.01, respectively. Over the past two years, Coca-Cola experienced a decline in inventory where in 2019, inventory profits were 4.53, and by the end of the 2020 financial year, the inventory profit was 4.04 (Guru Focus, 2021). The same applies to Pepsi as its founding profits dropped again in the two years 2019 and 2020 by 9.32 and 8.46, respectively.

 

The profitability of inventory often varies greatly between different industries. However, in the beverage industry, a higher rate indicates faster inventory, and on the other hand, a lower rate suggests that there are slow-moving or, at times, outdated items in the company’s stock. The decline in Coca-Cola and Pepsi stocks indicates that its products have sold less than in previous years. The shelf life of Coca-Cola products as long as the product takes years to expire but still faces the problem of selling their product in the last two years but in all cases it was still a good balance. One thing I believe has caused a decline in the value of the company’s assets is a global epidemic that hit 2020, which resulted in many consumers not buying products from the company. Looking at Pepsi’s inventory, we can conclude that it sold its products twice as fast as Coca-Cola, and this was due to a product portfolio between the two companies. Pepsi sells a lot of products, but mainly sells to retailers, and most of them tend to have a short expiration date. Coca-Cola, on the other hand, sells most of its products to a variety of bottled companies worldwide.

 

Average days in Inventory

 

The average number of days in the inventory rate is related to the inventory profit and measures primarily how many days a company takes to sell its entire inventory. According to TradeGecko (2020), calculate the acquisition time. It provides valuable information and allows the company to evaluate how it manages its inventory and how it effectively operates its businesses, and helps identify various areas that need improvement. The minimum number of intermediate days listed in the beverage industry suggests that the company sells its products over a period of time.

From calculated data, the average day-to-day Coca-Cola inventory for September 2021 ended at 74.14, why at Pepsi it was 45.50. over the past two years, in 2020 and 2019, the average day in Coca-Cola company inventory was 90.28 days and 80.57 days, while Pepsi was 43.10 days and 39.16 days, respectively. Looking at this data, we can conclude that Pepsi had significantly better ratings than the Coca-Cola company, and similarly the emergence of goods affected by the COVID-19 epidemic in 2020, the average inventory dates also did not work well.

 

Companies Inventing Inventories

 

A key role in Pepsi’s innovation is to ensure that certain projects the company undertakes can enter the market. With a variety of its products to its customers, Pepsi tends to sew different parts such as bottle caps and combine the final product to be sold on the market. Coca-Cola, on the other hand, makes the most of the various discounts offered on the mass production of its production units. This plays a continuous supply of immature and easily accessible and prevents inflation. The high value of Coca-Cola and Pepsi goods are delivered mainly by consumers who are satisfied that they have good products in the market, and some features may have a product shortfall such as shipping but not production. With this, we can see Pepsi has better ratings than Coca-Cola.

 

Inventory Turnover (IT)= (Cost of goods sold/Total Inventories)

 

 

Inventory Turnover (IT)= (Cost of goods sold/Total Inventories)
COCA-COLA Pepsi Co.
Coca-cola’s inventory turnover for the quarter that ended in September 2021. Pepsi Co. Inventory turnover for the quarter that ended in September 2021
Inventory Turnover Q Sep 2021 Inventory Turnover Q Sep 2021
Cost of Goods Sold (Q Sep 2021)  $                    3,977.00 Cost of Goods Sold (Q Sep 2021)  $  9,394.00
Total Inventories Total Inventories
Q June 2021  $                  3,281.00 Q June 2021  $  5,006.00
Q September 2021  $                  3,182.00 Q September 2021  $  4,364.00
Total Inventories  $                    3,231.50 Total Inventories  $  4,685.00
Coca-cola’s Inventory Turnover 1.230697818 Pepsi’s Inventory Turnover 2.0051227
For the last Two years
Company Year Cost of Goods sold Total Inventories Inventory Turnover
Coca-cola 2020  $                 13,433.00  $                  3,322.50 4.04303988
2019 4.53
Pepsi Co. 2020  $                 31,797.00  $                  3,755.00 8.467909454
2019 9.32

 

 

Analyzing Inventory Ratios

 

Average days in Inventory= (Total Inventories/ Cost of goods sold)*days in period
Note: My Calculations are in quarters. Thus, days in period would be; (365/4) 91.25
COCA-COLA Pepsi Co.
Coca-cola’s average days in inventory for the three months ended in September 2021; Pepsi’s average days in inventory for the three months ended in September 2021;
Total Inventories  $  3,231.50 Total Inventories  $  4,685.00
Cost of Goods Sold  $  3,977.00 Cost of Goods Sold  $  9,394.00
Average days in inventory 74.14493 Average days in inventory 45.50844
Company Year Average days in Inventory
Coca-cola 2020 90.278605
2019 80.573951
Pepsi Co. 2020 43.103909
2019 39.16309

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