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GuruFocus has detected 2 Warning Signs with R.R.Donnelley & Sons Co $RRD.
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R.R.Donnelley & Sons Co (NYSE:RRD)
Total Inventories
$380 Mil (As of Dec. 2016)

R.R.Donnelley & Sons Co's total inventories for the quarter that ended in Dec. 2016 was $380 Mil. R.R.Donnelley & Sons Co's average total inventories from the quarter that ended in Sep. 2016 to the quarter that ended in Dec. 2016 was $515 Mil.

In Ben Graham’s calculation of liquidation value, inventory is only considered worth half of its book value. R.R.Donnelley & Sons Co's liquidation value for the quarter that ended in Dec. 2016 was $-2,539 Mil.

Inventory can be measured by days sales of inventory (DSI).

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

Inventory turnover measures how fast the company turns over its inventory within a year. R.R.Donnelley & Sons Co's inventory turnover for the quarter that ended in Dec. 2016 was -1.65.

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.


Definition

Total Inventories 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.

R.R.Donnelley & Sons Co's liquidation value for the quarter that ended in Dec. 2016 is

Liquidation value (Q: Dec. 2016 )
=Cash and Cash Equivalents-Total Liabilities+(0.75 * Account Receivable)+(0.5 * Inventory)
=646.2-4390.4+0.75 * 1354.4+0.5 * 379.6
=-2,539

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

R.R.Donnelley & Sons Co's Days Sales of Inventory for the three months ended in Dec. 2016 is

Days Sales of Inventory (DSI)
=Average Inventory (Q: Dec. 2016 )/Revenue (Q: Dec. 2016 )*Days in Period
=515.35/-1257.8*365 / 4
=

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

R.R.Donnelley & Sons Co's Days Inventory for the three months ended in Dec. 2016 is calculated as:

Days Inventory=Average Inventory (Q: Dec. 2016 )/Cost of Goods Sold (Q: Dec. 2016 )*Days in Period
=515.35/-852.7*365 / 4
=

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

R.R.Donnelley & Sons Co's Inventory Turnover for the quarter that ended in Dec. 2016 is calculated as

Inventory Turnover=Cost of Goods Sold (Q: Dec. 2016 ) / Average Inventory (Q: Dec. 2016 )
=-852.7 / 515.35
=-1.65

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.

R.R.Donnelley & Sons Co's Inventory to Revenue for the quarter that ended in Dec. 2016 is calculated as

Inventory to Revenue=Average Inventory (Q: Dec. 2016 ) / Revenue (Q: Dec. 2016 )
=515.35 / -1257.8
=

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's 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 local exchange's currency.

R.R.Donnelley & Sons Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Inventory 710696562561511510501586592380

R.R.Donnelley & Sons Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Inventory 653586560617640592607597651380
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