- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 12. Introduction to Financial Statement Modeling
- Subject 1. Building a Financial Statement Model
CFA Practice Question
To project future inventory, an analyst can assume an inventory turnover rate and combine it with projected:
B. COGS.
C. operating income.
A. sales.
B. COGS.
C. operating income.
Correct Answer: B
Inventory = COGS / inventory turnover rate.
User Contributed Comments 2
| User | Comment |
|---|---|
| tpraturi | Inventory Turnover Rate = COGS / Average Inventory |
| davidt876 | good point tpraturi! so if you're modelling ending inventory (EI) when we know beginning inventory (BI) and the average historical turnover rate: average inventory = COGS / inventory turnover rate (EI+BI)/2 = COGS / inventory turnover rate EI + BI = (COGS / inventory rate) * 2 EI = ((COGS / inventory rate) * 2) - BI |