Chapter 5: Analysis of Inventories

In this section

• Inventory Measurement and Valuation (Cost vs. Net Realizable Value)
  Inventory Measurement and Valuation (Cost vs. Net Realizable Value) (CFA Level 1): Core Principles of Inventory Valuation, Lower of Cost or Net Realizable Value (NRV), and What Constitutes “Cost”?. Key definitions, formulas, and exam tips.
• Inventory Method Choices under IFRS vs. US GAAP
  Inventory Method Choices under IFRS vs. US GAAP (CFA Level 1): Permissible Methods under IFRS, FIFO (First-In, First-Out), and Weighted Average Cost (WAC). Key definitions, formulas, and exam tips.
• Effects of Inflation and Deflation on Inventory Methods
  Effects of Inflation and Deflation on Inventory Methods (CFA Level 1): Basic Dynamics of Price Movements, How Cost Flow Assumptions Operate, and FIFO (First-In, First-Out). Key definitions, formulas, and exam tips.
• Periodic vs. Perpetual Inventory Systems
  Periodic vs. Perpetual Inventory Systems (CFA Level 1): Periodic Inventory System, Advantages of the Periodic System, and Disadvantages of the Periodic System. Key definitions, formulas, and exam tips.
• Inventory Write-Downs, Write-Offs, and Reversals
  Inventory Write-Downs, Write-Offs, and Reversals (CFA Level 1): Defining the Terms, Basics of Inventory Valuation, and Write-Downs. Key definitions, formulas, and exam tips.
• Inventory Disclosures and Key Analytical Considerations
  Inventory Disclosures and Key Analytical Considerations (CFA Level 1): Common Disclosures in the Footnotes, Valuation Method, and Write-Downs and Potential Reversals. Key definitions, formulas, and exam tips.
• Impact of Inventory Management on Profitability and Liquidity
  Impact of Inventory Management on Profitability and Liquidity (CFA Level 1): Linking Inventory to Profitability, Lowering Holding Costs and Enhancing Margins, and Write-Downs and Impact on Net Income. Key definitions, formulas, and exam tips.
• Inventory Turnover Analysis Across Industries
  Inventory Turnover Analysis Across Industries (CFA Level 1): Why Inventory Turnover Ratios Matter and Days Inventory on Hand (DIOH) and Core Calculations. Key definitions, formulas, and exam tips.
• Industry-Specific Inventory KPIs (Retail, Manufacturing)
  Industry-Specific Inventory KPIs (Retail, Manufacturing) (CFA Level 1): Retail Industry KPIs, Gross Margin Return on Investment (GMROI), and Practical Observations. Key definitions, formulas, and exam tips.