Lecture 5 0206 - ORIE 350 Lecture#5 February 6 2007...

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    ORIE 350 Lecture #5 February 6, 2007
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    Inventory Turnover The “retail revolution” began in the early 1960’s More inventory turns meant you could live with lower gross profits Kresge started K-Mart, Dayton’s started Target. Traditional Dept. Stores: 4 turns K-Mart, Wal-Mart, Target: ~8 turns
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    Inventory Turnover Year over the Inventory Average CGS Annual Year per Turns Inventory =
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    Inventory Turnover – Days on Hand Year per Turns Inventory 365 Hand On Inventory of Days =
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    Inventory Turnover Harley Davidson sells to distributors, so they keep little inventory of finished motorcycles, hence they have 10+ turns per year.
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    Accounts Receivables Turnover Indicates how quickly our customers pay us Includes cash sales (instant!) and credit sales (have to wait). A/R Average Sales Net Turnover s Receivable Accounts =
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    Payables Turnover Indicates how quickly we pay our bills. Watched carefully by suppliers, they may not extend trade credit if this is low.
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