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Li & Fung Ltd (OTCPK:LFUGF)
Inventory
$633 Mil (As of Jun. 2014)

Li & Fung Ltd's inventory for the quarter that ended in Jun. 2014 was $633 Mil.

In Ben Graham’s calculation of liquidation value, inventory is only considered worth half of its book value. Li & Fung Ltd's liquidation value for the quarter that ended in Jun. 2014 was $-7,116 Mil.

Inventory can be measured by days sales of inventory (DSI). Li & Fung Ltd's days sales of inventory (DSI) for the six months ended in Jun. 2014 was 6.62.

Days inventory indicates the number of days of goods in sales that a company has in the inventory. Li & Fung Ltd's days inventory for the six months ended in Jun. 2014 was 7.44.

Inventory turnover measures how fast the company turns over its inventory within a year. Li & Fung Ltd's inventory turnover for the quarter that ended in Jun. 2014 was 12.22.

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. Li & Fung Ltd's inventory to revenue ratio for the quarter that ended in Jun. 2014 was 0.07.


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.

Li & Fung Ltd's liquidation value for the quarter that ended in Jun. 2014 is

Liquidation value (Q: Jun. 2014 )
=Cash and Cash Equivalents-Total Liabilities+(0.75 * Account Receivable)+(0.5 * Inventory)
=543.795-7976.94+0.75 * 0+0.5 * 633.344
=-7,116

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

Li & Fung Ltd's Days Sales of Inventory for the six months ended in Jun. 2014 is

Days Sales of Inventory (DSI)
=Inventory (Q: Jun. 2014 )/Revenue (Q: Jun. 2014 )*Days in Period
=633.344/8709.6*91
=6.62

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

Li & Fung Ltd's Days Inventory for the six months ended in Jun. 2014 is calculated as:

Days Inventory=Inventory (Q: Jun. 2014 )/Cost of Goods Sold (Q: Jun. 2014 )*Days in Period
=633.344/7741.923*91
=7.44

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

Li & Fung Ltd's Inventory Turnover for the quarter that ended in Jun. 2014 is calculated as

Inventory Turnover=Cost of Goods Sold (Q: Jun. 2014 ) / Average Inventory (Q: Jun. 2014 )
=7741.923 / 633.344
=12.22

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.

Li & Fung Ltd's Inventory to Revenue for the quarter that ended in Jun. 2014 is calculated as

Inventory to Revenue=Inventory (Q: Jun. 2014 ) / Revenue (Q: Jun. 2014 )
=633.344 / 8709.6
=0.07

* 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.

Li & Fung Ltd Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Inventory 59811712643013077691,0369391,100

Li & Fung Ltd Quarterly Data

Dec09Jun10Dec10Jun11Dec11Jun12Dec12Jun13Dec13Jun14
Inventory 3073357699871,0361,0759391,1211,100633
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