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Basic Question 9 of 10

To project future inventory, an analyst can assume an inventory turnover rate and combine it with projected:

A. sales.
B. COGS.
C. operating income.
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User Contributed Comments 2

User Comment
tpraturi Inventory Turnover Rate = COGS / Average Inventory
davidt876 good point tpraturi!

so if you're modelling ending inventory (EI) when we know beginning inventory (BI) and the average historical turnover rate:

average inventory = COGS / inventory turnover rate
(EI+BI)/2 = COGS / inventory turnover rate
EI + BI = (COGS / inventory rate) * 2

EI = ((COGS / inventory rate) * 2) - BI
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Learning Outcome Statements

demonstrate the development of a sales-based pro forma company model

CFA® 2024 Level I Curriculum, Volume 3, Module 12.