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Walgreen Co (NYSE:WAG)
Total Inventories
\$6,076 Mil (As of Aug. 2014)

Walgreen Co's total inventories for the quarter that ended in Aug. 2014 was \$6,076 Mil. Walgreen Co's average total inventories from the quarter that ended in May. 2014 to the quarter that ended in Aug. 2014 was \$6,258 Mil.

In Ben Grahams calculation of liquidation value, inventory is only considered worth half of its book value. Walgreen Co's liquidation value for the quarter that ended in Aug. 2014 was \$-8,628 Mil.

Inventory can be measured by days sales of inventory (DSI). Walgreen Co's days sales of inventory (DSI) for the three months ended in Aug. 2014 was 29.96.

Days inventory indicates the number of days of goods in sales that a company has in the inventory. Walgreen Co's days inventory for the three months ended in Aug. 2014 was 41.59.

Inventory turnover measures how fast the company turns over its inventory within a year. Walgreen Co's inventory turnover for the quarter that ended in Aug. 2014 was 2.19.

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. Walgreen Co's inventory to revenue ratio for the quarter that ended in Aug. 2014 was 0.33.

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.

Walgreen Co's liquidation value for the quarter that ended in Aug. 2014 is

 Liquidation value (Q: Aug. 2014 ) = Cash and Cash Equivalents - Total Liabilities + (0.75 * Account Receivable) + (0.5 * Inventory) = 2646 - 16725 + 0.75 * 3218 + 0.5 * 6076 = -8,628

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

Walgreen Co's Days Sales of Inventory for the three months ended in Aug. 2014 is

 Days Sales of Inventory (DSI) = Average Inventory (Q: Aug. 2014 ) / Revenue (Q: Aug. 2014 ) * Days in Period = 6257.5 / 19057 * 365 / 4 = 29.96

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

Walgreen Co's Days Inventory for the three months ended in Aug. 2014 is calculated as:

 Days Inventory = Average Inventory (Q: Aug. 2014 ) / Cost of Goods Sold (Q: Aug. 2014 ) * Days in Period = 6257.5 / 13730 * 365 / 4 = 41.59

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

Walgreen Co's Inventory Turnover for the quarter that ended in Aug. 2014 is calculated as

 Inventory Turnover = Cost of Goods Sold (Q: Aug. 2014 ) / Average Inventory (Q: Aug. 2014 ) = 13730 / 6257.5 = 2.19

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.

Walgreen Co's Inventory to Revenue for the quarter that ended in Aug. 2014 is calculated as

 Inventory to Revenue = Average Inventory (Q: Aug. 2014 ) / Revenue (Q: Aug. 2014 ) = 6257.5 / 19057 = 0.33

* 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.

Walgreen Co Annual Data

 Aug05 Aug06 Aug07 Aug08 Aug09 Aug10 Aug11 Aug12 Aug13 Aug14 Inventory 5,593 6,050 6,791 7,249 6,789 7,378 8,044 7,036 6,852 6,076

Walgreen Co Quarterly Data

 May12 Aug12 Nov12 Feb13 May13 Aug13 Nov13 Feb14 May14 Aug14 Inventory 7,004 7,036 7,821 7,253 6,881 6,852 7,729 7,213 6,439 6,076
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