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Diageo PLC (NYSE:DEO)
Inventory
$7,117 Mil (As of Dec. 2013)

Diageo PLC's inventory for the quarter that ended in Dec. 2013 was $7,117 Mil.

In Ben Graham’s calculation of liquidation value, inventory is only considered worth half of its book value. Diageo PLC's liquidation value for the quarter that ended in Dec. 2013 was $-19,376 Mil.

Inventory can be measured by days sales of inventory (DSI). Diageo PLC's days sales of inventory (DSI) for the six months ended in Dec. 2013 was 66.27.

Days inventory indicates the number of days of goods in sales that a company has in the inventory. Diageo PLC's days inventory for the six months ended in Dec. 2013 was 178.69.

Inventory turnover measures how fast the company turns over its inventory within a year. Diageo PLC's inventory turnover for the quarter that ended in Dec. 2013 was 0.51.

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. Diageo PLC's inventory to revenue ratio for the quarter that ended in Dec. 2013 was 0.73.


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.

Diageo PLC's liquidation value for the quarter that ended in Dec. 2013 is

Liquidation value (Q: Dec. 2013 )
=Cash and Cash Equivalents-Total Liabilities+(0.75 * Account Receivable)+(0.5 * Inventory)
=1680.39538715-28268.5337727+0.75 * 4871.49917628+0.5 * 7116.96869852
=-19,376

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

Diageo PLC's Days Sales of Inventory for the six months ended in Dec. 2013 is

Days Sales of Inventory (DSI)
=Inventory (Q: Dec. 2013 )/Revenue (Q: Dec. 2013 )*Days in Period
=7116.96869852/9772.6523888*91
=66.27

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

Diageo PLC's Days Inventory for the six months ended in Dec. 2013 is calculated as:

Days Inventory=Inventory (Q: Dec. 2013 )/Cost of Goods Sold (Q: Dec. 2013 )*Days in Period
=7116.96869852/3624.38220758*91
=178.69

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

Diageo PLC's Inventory Turnover for the quarter that ended in Dec. 2013 is calculated as

Inventory Turnover=Cost of Goods Sold (Q: Dec. 2013 ) / Average Inventory (Q: Dec. 2013 )
=3624.38220758 / 7116.96869852
=0.51

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.

Diageo PLC's Inventory to Revenue for the quarter that ended in Dec. 2013 is calculated as

Inventory to Revenue=Inventory (Q: Dec. 2013 ) / Revenue (Q: Dec. 2013 )
=7116.96869852 / 9772.6523888
=0.73

* 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.

Diageo PLC Annual Data

Jun04Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13
Inventory 4,0104,1044,4045,0195,4455,0385,0175,6116,1706,407

Diageo PLC Quarterly Data

Jun09Dec09Jun10Dec10Jun11Dec11Jun12Dec12Jun13Dec13
Inventory 5,0385,2975,0175,3645,6115,8316,1706,6846,4077,117
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