Early warning indicator and Inventory days: Difference between pages

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imported>Doug Williamson
(Create page. Source: EWI page & ACT blog https://www.treasurers.org/weekly-roundup-29-april-updates-treasury-matters-relating-coronavirus)
 
imported>Doug Williamson
(Mend link.)
 
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(EWI).
''Financial ratio analysis - management efficiency ratios.''


1. ''Bank supervision.''
Inventory days is a working capital management ratio calculated by dividing inventory outstanding at the end of a time period by the average daily cost of goods sold for the period.  


A qualitative or quantitative measure used by a bank to identify stress, or potential stress, at an appropriately early stage to enable timely and effective responses.
For example: a company holds on average £30,000 of stock over a year. It sells £300,000 of goods per annum.  


The inventory days are:


2. ''Risk management.''
(30,000 / 300,000) x 365


Any qualitative or quantitative measure to identify potential problems at an appropriately early stage.
= 36.5 days




:<span style="color:#4B0082">'''''EWIs in supplier financials'''''</span>
A lower number of days is usually considered desirable, because it is a quick measure of the amount of stock held, although the business must also gauge the amount of stock required to meet customers’ delivery expectations.


:Update on treasury matters relating to the coronavirus: Liquidity management
:While many businesses have faced a slow-down in sales receipts from customers, it is encouraging that other organisations are adopting a more positive range of approaches to paying their supply chains with some...
:... Monitoring supplier financials more aggressively with agreed metrics forming part of Early Warning Indicators on the state of the immediate supply chain
:''Association of Corporate Treasurers, 28 April 2020, Naresh Aggarwal, Associate Director Policy & Technical.''


Also known as Days inventory outstanding (DIO).




== See also ==
== See also ==
* [[Bank]]
* [[Cost of goods sold]]
* [[Bank supervision]]
* [[Creditors]]
* [[CFP]]
* [[Days sales outstanding ]] (DSO)
* [[Liquidity risk]]
* [[DPO]]
* [[Overnight indexed swap]]
* [[Inventory]]
* [[Risk management]]
* [[Inventory turnover]]
* [[Stress]]
* [[Management efficiency ratio]]
* [[Supply chain]]
* [[Net working capital days]]
* [[Operating cycle]]
* [[Payables management]]
* [[Working capital]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]
[[Category:Cash_management]]
[[Category:Financial_products_and_markets]]
[[Category:Liquidity_management]]

Revision as of 20:20, 25 June 2022

Financial ratio analysis - management efficiency ratios.

Inventory days is a working capital management ratio calculated by dividing inventory outstanding at the end of a time period by the average daily cost of goods sold for the period.


For example: a company holds on average £30,000 of stock over a year. It sells £300,000 of goods per annum.

The inventory days are:

(30,000 / 300,000) x 365

= 36.5 days


A lower number of days is usually considered desirable, because it is a quick measure of the amount of stock held, although the business must also gauge the amount of stock required to meet customers’ delivery expectations.


Also known as Days inventory outstanding (DIO).


See also