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Applied Materials Inc (NAS:AMAT)
Inventory
$1,564 Mil (As of Apr. 2014)

Applied Materials Inc's inventory for the quarter that ended in Apr. 2014 was $1,564 Mil.

In Ben Graham’s calculation of liquidation value, inventory is only considered worth half of its book value. Applied Materials Inc's liquidation value for the quarter that ended in Apr. 2014 was $-488 Mil.

Inventory can be measured by days sales of inventory (DSI). Applied Materials Inc's days sales of inventory (DSI) for the three months ended in Apr. 2014 was 60.49.

Days inventory indicates the number of days of goods in sales that a company has in the inventory. Applied Materials Inc's days inventory for the three months ended in Apr. 2014 was 105.27.

Inventory turnover measures how fast the company turns over its inventory within a year. Applied Materials Inc's inventory turnover for the quarter that ended in Apr. 2014 was 0.86.

Inventory to revenue ratio determines the ability of a company to manage their inventory levels. It measures the percentage of Inventories the company currently has on hand to support the current amount of Revenue. Applied Materials Inc's inventory to revenue ratio for the quarter that ended in Apr. 2014 was 0.66.


Definition

Inventory includes the raw materials, work-in-process goods and completely finished goods of a company. It is a portion of a company’s current assets.


Explanation

Inventory control is an important part of business operation. If a company does not have enough inventory, it may not be able to meet customers’ required delivery time. If it has too much inventory, the cost of holding the inventory can be high.

1. In Ben Graham’s calculation of liquidation value, inventory is only considered worth half of its book value.

Applied Materials Inc's liquidation value for the quarter that ended in Apr. 2014 is

Liquidation value (Q: Apr. 2014 )
=Cash and Cash Equivalents-Total Liabilities+(0.75 * Account Receivable)+(0.5 * Inventory)
=2599-5080+0.75 * 1615+0.5 * 1564
=-488

2. Inventory can be measured by Days Sales of Inventory (DSI).

Applied Materials Inc's Days Sales of Inventory for the three months ended in Apr. 2014 is

Days Sales of Inventory (DSI)
=Inventory (Q: Apr. 2014 )/Revenue (Q: Apr. 2014 )*Days in Period
=1564/2353*91
=60.49

3. Days Inventory indicates the number of days of goods in sales that a company has in the inventory.

Applied Materials Inc's Days Inventory for the three months ended in Apr. 2014 is calculated as:

Days Inventory=Inventory (Q: Apr. 2014 )/Cost of Goods Sold (Q: Apr. 2014 )*Days in Period
=1564/1352*91
=105.27

4. Inventory Turnover measures how fast the company turns over its inventory within a year.

Applied Materials Inc's Inventory Turnover for the quarter that ended in Apr. 2014 is calculated as

Inventory Turnover=Cost of Goods Sold (Q: Apr. 2014 ) / Average Inventory (Q: Apr. 2014 )
=1352 / 1564
=0.86

5. Inventory to Revenue determines the ability of a company to manage their inventory levels. It measures the percentage of Inventories the company currently has on hand to support the current amount of Revenue.

Applied Materials Inc's Inventory to Revenue for the quarter that ended in Apr. 2014 is calculated as

Inventory to Revenue=Inventory (Q: Apr. 2014 ) / Revenue (Q: Apr. 2014 )
=1564 / 2353
=0.66

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Be Aware

Manufacturers with durable competitive advantages have the advantage that the products they sell do not change, and therefore will never become obsolete. Buffett likes this advantage.

When identifying manufacturers with durable competitive advantage, look for inventory and net earnings that rise correspondingly. This indicates that the company is finding profitable ways to increase sales which called for an increase in inventory.

Manufacturers with inventories that spike up and down are indicative of competitive industries subject to boom and bust.


Related Terms

Revenue, Cash and Cash Equivalents, Total Liabilities, Account Receivable, Inventory, NCAV, Days Inventory, Cost of Goods Sold, Inventory Turnover, Inventory to Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Applied Materials Inc Annual Data

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
Inventory 1,1391,0341,4071,3131,9871,6271,5471,7011,2721,413

Applied Materials Inc Quarterly Data

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
Inventory 1,7721,5941,3801,2721,2781,3181,3581,4131,5331,564
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