Session 5: Financial Reporting and Analysis: Inventories and Long-lived Assets
Reading 21: Inventories: Implications for Financial Statements and Ratios
LOS f: Discuss issues that analysts should consider when examining a company's inventory disclosures and other sources of information.
Tim Rogers is senior equity analyst with White Capital LLP. While analyzing the financial statements of Drako Toys Inc., a toy manufacturer based in Cleveland, Ohio, Tim concludes that Drako is expected to see above-average sales growth over the next three years. Which of the following conditions most likely support Tim’s conclusion?
|
A) |
Finished goods inventory growing faster than sales in the last two years. | |
|
B) |
Increase in finished goods inventory and corresponding decline in raw-materials and work-in-progress inventory over the last two years. | |
|
C) |
Increase in raw-materials and work-in-progress inventory and corresponding decline in finished goods inventory over the last two years. | |
An increase in raw materials and/or work-in-process inventory is probably an indication of an expected increase in demand. Conversely, an increase in finished goods inventory, while raw materials and work-in-process are decreasing, may be an indication of decreasing demand. Finished goods inventory that is growing faster than sales may be an indication of declining demand. | 
发表于 2011-3-7 15:22
|