Just to make sure sir, in 10:42 if the inventory number at the end of the period was"10" which is lower than the inventory "30" at the beginning period, would we still need to add the change of "20" in inventory to the COGS (200+20=220)? Or it would be subtracted in this case? Thank you so much Respect.
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An alternative method includes using the cost of goods sold (COGS) instead of sales. Analysts divide COGS by average inventory instead of sales for greater accuracy in the inventory turnover calculation because sales include a markup over cost. Dividing sales by average inventory inflates inventory turnover. In both situations, average inventory is used to help remove seasonality effects. www.investopedia.com/terms/i/inventoryturnover.asp
COGS is used instead of sales for greater accuracy in the inventory turnover calculation because sales include a markup over cost. Dividing sales by average inventory inflates inventory turnover. IFT Support Team
This ratio shows how efficient a company is at collecting its credit sales from customers. In some ways the receivables turnover ratio can be viewed as a liquidity ratio as well. Companies are more liquid the faster they can covert their receivables into cash. Hence, higher ratio indicates greater efficiency. IFT support team
I think you're confusing it with the "Day Sales in Receivable" or DSR (365 / Receivable Turnover Ratio). For DSR, the shorter the better. That means your denominator should be low.
Solvecy ratio is actually a group of ratios, and those 2 ratios you mentioned are part of it. The 1st one is called debt-to-equity ratio and the other one is called financial leverage ratio or equity multiplier.
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Just to make sure sir, in 10:42 if the inventory number at the end of the period was"10" which is lower than the inventory "30" at the beginning period, would we still need to add the change of "20" in inventory to the COGS (200+20=220)? Or it would be subtracted in this case?
Thank you so much
Respect.
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IFT Support Team
Purchases in that case would be -200+20 = -180 (negative meaning cash outflow)
Even though the curriculum says that Inventory turnover Ratio= COGS/Avg Inventory, but shouldn't it actually be =Sales/Avg Inventory?
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An alternative method includes using the cost of goods sold (COGS) instead of sales. Analysts divide COGS by average inventory instead of sales for greater accuracy in the inventory turnover calculation because sales include a markup over cost. Dividing sales by average inventory inflates inventory turnover. In both situations, average inventory is used to help remove seasonality effects. www.investopedia.com/terms/i/inventoryturnover.asp
COGS is used instead of sales for greater accuracy in the inventory turnover calculation because sales include a markup over cost. Dividing sales by average inventory inflates inventory turnover.
IFT Support Team
@@IFT-CFA Thanks for the explanation. Your videos have helped me a lot throughout. A big shoutout
Intel and AMD roles have reversed now.
It is discussed just to explain the concept.
IFT Support Team
Why Is greater efficiency higher number un Receivables Turnover Ratio?. I think it would be better less days to collect cash.
This ratio shows how efficient a company is at collecting its credit sales from customers. In some ways the receivables turnover ratio can be viewed as a liquidity ratio as well. Companies are more liquid the faster they can covert their receivables into cash. Hence, higher ratio indicates greater efficiency.
IFT support team
I think you're confusing it with the "Day Sales in Receivable" or DSR (365 / Receivable Turnover Ratio).
For DSR, the shorter the better. That means your denominator should be low.
Isn't solvency ratio debt/equity rather than asset/equity?
Assets / equity is a financial leverage ratio. It is a type of solvency ratio. Please refer to exhibit 14 of Curriculum Reading 26.
IFT Support Team
Solvecy ratio is actually a group of ratios, and those 2 ratios you mentioned are part of it.
The 1st one is called debt-to-equity ratio and the other one is called financial leverage ratio or equity multiplier.
thanks for good information
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Intel VS AMD examples feels outdated now with the strides that AMD is making in the industry
🙏🙏👍👍
Wrong example of AMD and Intel
dude !! video was uploaded 5 years ago