I was reading about Dupont Analysis using ROE, I wonder if Asset Turnover could be used as a substitute or proxy to Inventory Turnover?
In a certain sense, inventories are kept as current assets which are to be sold soon.
What do you guys think?
Asset turnover does not measure the inventory as good as inventory turnover. Asset turnover ratio is the sales divided by asset. Asset contained more than just inventory. Personally, I don;t use inventory turnover but use inventory days to track the inventory.
Okay! Got it. Thanks!
But say for companies that are more service based or software, what would you see? I’m not sure inventory days could be used.
When it comes for service based companies, inventory does not matter anymore. I will just focus on receivables days and payable days. I will also focus on ROA.
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