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ShangPharma Corp (NYSE:SHP)
Total Inventories
\$3.0 Mil (As of Sep. 2012)

ShangPharma Corp's total inventories for the quarter that ended in Sep. 2012 was \$3.0 Mil. ShangPharma Corp's average total inventories from the quarter that ended in Jun. 2012 to the quarter that ended in Sep. 2012 was \$2.9 Mil.

In Ben Grahams calculation of liquidation value, inventory is only considered worth half of its book value. ShangPharma Corp's liquidation value for the quarter that ended in Sep. 2012 was \$28.6 Mil.

Inventory can be measured by days sales of inventory (DSI). ShangPharma Corp's days sales of inventory (DSI) for the three months ended in Sep. 2012 was 8.23.

Days inventory indicates the number of days of goods in sales that a company has in the inventory. ShangPharma Corp's days inventory for the three months ended in Sep. 2012 was 11.36.

Inventory turnover measures how fast the company turns over its inventory within a year. ShangPharma Corp's inventory turnover for the quarter that ended in Sep. 2012 was 8.03.

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. ShangPharma Corp's inventory to revenue ratio for the quarter that ended in Sep. 2012 was 0.09.

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.

ShangPharma Corp's liquidation value for the quarter that ended in Sep. 2012 is

 Liquidation value (Q: Sep. 2012 ) = Cash and Cash Equivalents - Total Liabilities + (0.75 * Account Receivable) + (0.5 * Inventory) = 34.312 - 30.088 + 0.75 * 30.566 + 0.5 * 3.002 = 28.6

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

ShangPharma Corp's Days Sales of Inventory for the three months ended in Sep. 2012 is

 Days Sales of Inventory (DSI) = Average Inventory (Q: Sep. 2012 ) / Revenue (Q: Sep. 2012 ) * Days in Period = 2.877 / 31.885 * 365 / 4 = 8.23

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

ShangPharma Corp's Days Inventory for the three months ended in Sep. 2012 is calculated as:

 Days Inventory = Average Inventory (Q: Sep. 2012 ) / Cost of Goods Sold (Q: Sep. 2012 ) * Days in Period = 2.877 / 23.101 * 365 / 4 = 11.36

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

ShangPharma Corp's Inventory Turnover for the quarter that ended in Sep. 2012 is calculated as

 Inventory Turnover = Cost of Goods Sold (Q: Sep. 2012 ) / Average Inventory (Q: Sep. 2012 ) = 23.101 / 2.877 = 8.03

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.

ShangPharma Corp's Inventory to Revenue for the quarter that ended in Sep. 2012 is calculated as

 Inventory to Revenue = Average Inventory (Q: Sep. 2012 ) / Revenue (Q: Sep. 2012 ) = 2.877 / 31.885 = 0.09

* 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

Historical Data

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

ShangPharma Corp Annual Data

 Dec08 Dec09 Dec10 Dec11 Inventory 0.0 0.0 0.0 0.0 0.0 0.0 1.1 1.1 1.3 2.8

ShangPharma Corp Quarterly Data

 Dec09 Jun10 Sep10 Dec10 Mar11 Sep11 Dec11 Mar12 Jun12 Sep12 Inventory 1.1 0.9 1.5 1.3 1.8 2.2 2.8 2.9 2.8 3.0
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