CFA Practice Question

There are 96 practice questions for this study session.

CFA Practice Question

To project future inventory, an analyst can assume an inventory turnover rate and combine it with projected:

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
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