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Rio Tinto PLC (NYSE:RIO)
Inventory Turnover
4.39 (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. Rio Tinto PLC's cost of goods sold for the six months ended in Dec. 2016 was \$13,321 Mil. Rio Tinto PLC's average inventory for the quarter that ended in Dec. 2016 was \$3,033 Mil. Rio Tinto PLC's inventory turnover for the quarter that ended in Dec. 2016 was 4.39.

Days inventory indicates the number of days of goods in sales that a company has in the inventory. Rio Tinto PLC's days inventory for the six months ended in Dec. 2016 was 41.55.

Inventory can be measured by Days Sales of Inventory (DSI). Rio Tinto PLC's days sales of inventory (DSI) for the six months ended in Dec. 2016 was 30.28.

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. Rio Tinto PLC's inventory to revenue ratio for the quarter that ended in Dec. 2016 was 0.17.

Definition

Rio Tinto 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 ) = 26799 / ( (3168 + 2937) / 2 ) = 26799 / 3052.5 = 8.78

Rio Tinto 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: Jun. 2016 ) + Inventory (Q: Dec. 2016 )) / 2 ) = 13321 / ( (3129 + 2937) / 2 ) = 13321 / 3033 = 4.39

* 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.

Rio Tinto PLC's Days Inventory for the six 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 = 3033 / 13321 * 365 / 2 = 41.55

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

Rio Tinto PLC's Days Sales of Inventory for the six 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 = 3033 / 18281 * 365 / 2 = 30.28

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.

Rio Tinto 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 ) = 3033 / 18281 = 0.17

* 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.

Rio Tinto PLC Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Inventory Turnover 1.64 3.13 6.54 7.73 7.21 6.56 6.08 6.72 7.43 8.78

Rio Tinto PLC Semi-Annual Data

 Jun12 Dec12 Jun13 Dec13 Jun14 Dec14 Jun15 Dec15 Jun16 Dec16 Inventory Turnover 3.29 3.36 2.93 3.01 2.97 3.41 3.39 3.92 4.28 4.39
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