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Summary Of Ibm's Inventory Turnover

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Inventory turnover measures the amount of times a company sells its average

merchandise inventory during a year. We start with the cost of goods sold (the cost of merchandise inventory the business has sold to its customers) over the average merchandise inventory for the year. To find the average inventory, you would combine both 2013 and 2014 to find the 2014 average and combine 2012 to 2013 to find the average for 2013. Having a high turnover rate means the company is capable of selling merchandise inventory with ease. In this case, the industry average came out to be 17.56 and the 2014 turnover was 4.05 times a year and 2013 turnover was 4.79. These results show IBM struggling to sell merchandise inventory to its customers and is a place the company needs to improve.
Days’ Sales in Inventory: …show more content…
Days’ sales in inventory measures the average number of days merchandise inventory is held in storage. This ratio is a key measurement for inventory using 365 days divided by inventory turnover. IBM held their inventory for 76 days during 2013 and 90 days during 2014. The industry average was extremely low at 21 days. The reason you wouldn’t want to keep your inventory in storage units is because the amount of money you earn is being put to use for insurance costs, taxes, fees, etc. the storage company may

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