Page 17 - FINAL CFA I SLIDES JUNE 2019 DAY 11
P. 17
Session Unit 11:
Inventory Management, p.88 38. Working Capital Management
Inventory too low = lost sales due to stock-outs
Inventory too high = carrying and obsolescence costs
because the firm’s capital is tied up in inventory.
tanties
What Now?
• Increasing average days’ inventory or a decreasing inventory turnover ratio can both
indicate that inventory is too large.
Beware when you compare firms with different strategies:
• grocery business typically has high inventory turnover, while an art gallery’s will be low!
