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Eaton Corp PLC (NYSE:ETN)
Inventory Turnover
1.45 (As of Dec. 2016)

Inventory turnover measures how fast the company turns over its inventory within a year. It is calculated as cost of goods sold divided by average inventory. Eaton Corp PLC's cost of goods sold for the three months ended in Dec. 2016 was \$3,319 Mil. Eaton Corp PLC's average inventory for the quarter that ended in Dec. 2016 was \$2,291 Mil. Eaton Corp PLC's inventory turnover for the quarter that ended in Dec. 2016 was 1.45.

Days inventory indicates the number of days of goods in sales that a company has in the inventory. Eaton Corp PLC's days inventory for the three months ended in Dec. 2016 was 62.99.

Inventory can be measured by Days Sales of Inventory (DSI). Eaton Corp PLC's days sales of inventory (DSI) for the three months ended in Dec. 2016 was 42.95.

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. Eaton Corp PLC's inventory to revenue ratio for the quarter that ended in Dec. 2016 was 0.47.

Definition

Eaton Corp PLC's Inventory Turnover for the fiscal year that ended in Dec. 2016 is calculated as

 Inventory Turnover (A: Dec. 2016 ) = Cost of Goods Sold / Average Inventory = Cost of Goods Sold (A: Dec. 2016 ) / ( (Inventory (A: Dec. 2015 ) + Inventory (A: Dec. 2016 )) / 2 ) = 13400 / ( (2323 + 2254) / 2 ) = 13400 / 2288.5 = 5.86

Eaton Corp PLC's Inventory Turnover for the quarter that ended in Dec. 2016 is calculated as

 Inventory Turnover (Q: Dec. 2016 ) = Cost of Goods Sold / Average Inventory = Cost of Goods Sold (Q: Dec. 2016 ) / ( (Inventory (Q: Sep. 2016 ) + Inventory (Q: Dec. 2016 )) / 2 ) = 3319 / ( (2328 + 2254) / 2 ) = 3319 / 2291 = 1.45

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

Explanation

Inventory Turnover measures how fast the company turns over its inventory within a year. A higher inventory turnover means the company has light inventory. Therefore the company spends less money on storage, write downs, and obsolete inventory. If the inventory is too light, it may affect sales because the company may not have enough to meet demand.

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

Eaton Corp PLC'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 = 2291 / 3319 * 365 / 4 = 62.99

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

Eaton Corp PLC's Days Sales of Inventory for the three months ended in Dec. 2016 is calculated as:

 Days Sales of Inventory (DSI) = Average Inventory (Q: Dec. 2016 ) / Revenue (Q: Dec. 2016 ) * Days in Period = 2291 / 4867 * 365 / 4 = 42.95

3. 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.

Eaton Corp PLC'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 ) = 2291 / 4867 = 0.47

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

Be Aware

Usually retailers pile up their inventories at holiday seasons to meet the stronger demand. Therefore, the inventory of a particular quarter of a year should not be used to calculate inventory turnover. An average inventory is a better indication.

Related Terms

Historical Data

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

Eaton Corp PLC Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Inventory Turnover 6.76 7.37 6.10 6.67 6.90 5.67 6.52 6.51 6.02 5.86

Eaton Corp PLC Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Inventory Turnover 1.56 1.56 1.48 1.51 1.49 1.45 1.40 1.45 1.45 1.45
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