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Inventory Turnover
1.54 (As of Mar. 2015)

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. MeadWestvaco Corp's cost of goods sold for the three months ended in Mar. 2015 was \$1,045 Mil. MeadWestvaco Corp's average inventory for the quarter that ended in Mar. 2015 was \$677 Mil. MeadWestvaco Corp's inventory turnover for the quarter that ended in Mar. 2015 was 1.54.

Days inventory indicates the number of days of goods in sales that a company has in the inventory. MeadWestvaco Corp's days inventory for the three months ended in Mar. 2015 was 59.12.

Inventory can be measured by Days Sales of Inventory (DSI). MeadWestvaco Corp's days sales of inventory (DSI) for the three months ended in Mar. 2015 was 48.19.

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. MeadWestvaco Corp's inventory to revenue ratio for the quarter that ended in Mar. 2015 was 0.53.

Definition

MeadWestvaco Corp's Inventory Turnover for the fiscal year that ended in Dec. 2014 is calculated as

 Inventory Turnover (A: Dec. 2014 ) = Cost of Goods Sold / Average Inventory = Cost of Goods Sold (A: Dec. 2014 ) / ( (Inventory (A: Dec. 2013 ) + Inventory (A: Dec. 2014 )) / 2 ) = 4465 / ( (686 + 673) / 2 ) = 4465 / 679.5 = 6.57

MeadWestvaco Corp's Inventory Turnover for the quarter that ended in Mar. 2015 is calculated as

 Inventory Turnover (Q: Mar. 2015 ) = Cost of Goods Sold / Average Inventory = Cost of Goods Sold (Q: Mar. 2015 ) / ( (Inventory (Q: Dec. 2014 ) + Inventory (Q: Mar. 2015 )) / 2 ) = 1045 / ( (673 + 681) / 2 ) = 1045 / 677 = 1.54

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

MeadWestvaco Corp's Days Inventory for the three months ended in Mar. 2015 is calculated as:

 Days Inventory = Average Inventory (Q: Mar. 2015 ) / Cost of Goods Sold (Q: Mar. 2015 ) * Days in Period = 677 / 1045 * 365 / 4 = 59.12

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

MeadWestvaco Corp's Days Sales of Inventory for the three months ended in Mar. 2015 is calculated as:

 Days Sales of Inventory (DSI) = Average Inventory (Q: Mar. 2015 ) / Revenue (Q: Mar. 2015 ) * Days in Period = 677 / 1282 * 365 / 4 = 48.19

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.

MeadWestvaco Corp's Inventory to Revenue for the quarter that ended in Mar. 2015 is calculated as

 Inventory to Revenue = Average Inventory (Q: Mar. 2015 ) / Revenue (Q: Mar. 2015 ) = 677 / 1282 = 0.53

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