Interest Earned = EBIT / Interest –1138 / 7 = 162.57 times Cash Coverage = (EBIT + Depreciation) / Interest –(1138 + 116) / 7 = 179.14 times 3-14 Computing **Inventory** **Ratios** **Inventory** **Turnover** = Cost of Goods Sold / **Inventory** –2006 / 301 = 6.66 times Days’ Sales in **Inventory** = 365 / **Inventory** **Turnover** –365 / 6.66 = 55 days 3-15 Computing Receivables **Ratios** Receivables **Turnover** = Sales / Accounts Receivable –5000 / 956 = 5.23 times Days’ Sales in Receivables = 365 / Receivables/

to make the needed investment in fixed assets. 4-48 Potential problems and limitations of financial **ratio** analysis Inflation can badly distort many firms’ balance sheet data. Thus the recorded values are often substantially different from “true” values Seasonal factors can distort **ratio** analysis. For example the **inventory** **turnover** **ratio** for a food processor will be radically different if the balance sheet figure used for/

and NOTE: years should go left to right… 2006E20052003Ind. CR2.58x1.46x2.3x2.7x QR0.93x0.5x0.8x1.0x What is the **inventory** **turnover** **ratio** (another “times” number) as compared to the industry average? Inv. **turnover**= = = 4.10x. Sales **Inventories** $7,036 $1,716 2006E20052004Ind. Inv. T.4.1x4.5x4.8x6.1x Interpretation **Inventory** **turnover** is below industry average. The company is carrying almost 3 months of/

) (in 1,000 TL) Liquidity **Ratios** Current **ratio**? Quick (acid-test) **ratio**? Leverage **Ratios** Debt-to-equity **ratio**? Debt-to-total assets (book leverage) **ratio**? Short term debt-to-total assets **ratio**? Long term debt-to-total assets **ratio**? Leverage **Ratios** Long term debt **ratio**? Times interest earned Cash coverage **ratio**? **Turnover** **Ratios** **Inventory** **turnover** **ratio**? Days’ sales in receivables Receivables **turnover** **ratio**? Day’s sales in receivables? Asset **turnover** **ratio**? Profitability **Ratios** Profit margin? ROA? ROE? Market/

little weaker than average. n **Inventory** **turnover** **ratio** n Days sales outstanding (accounts receivable) n Fixed assets **turnover** n Total assets **turnover** Asset Management **Ratios** Sales **Inventory** 2010 4.8x 2011 4.6x Industry 7.0x Low **inventory** **turnover**--excess **inventory** for current level of sales. **Inventory** **turnover** =. (To indicate whether a firm carries too many **inventories** and whether it manages **inventories** effectively.) n Sales prices include markups but **inventories** carried at cost. n Sales/

assets’. Most commonly used AMR: – **Inventory** **turnover** **ratio** (times/days) – Receivable **turnover** **ratio** (times/days) – Accounts Payable **turnover** (times/days) – Fixed asset **turnover** – Total asset **turnover** i.**Inventory** **turnover** **ratio** Formulas: (COGS/avg. inv.) (365/inv. **turnover**) **Inventory** **turnover** times measures how many times in an year the firm’s **inventory** has been sold. – What if **inventory** **turnover** **ratio** is low or high? **Inventory** **turnover** days measure how many days the **inventory** stays with us before we are/

. Comparison to industry averages is also popular, as in the following example. © 2012 Pearson Prentice Hall. All rights reserved. 3-16 Using Financial **Ratios**: Types of **Ratio** Comparisons (cont.) Caldwell Manufacturing ’ s calculated **inventory** **turnover** for 2012 and the average **inventory** **turnover** were as follows: **Inventory** **turnover**, 2012 Caldwell Manufacturing14.8 Industry average 9.7 © 2012 Pearson Prentice Hall. All rights reserved. 3-17 Table 3.5 Financial/

caused by a decline in sales or an increase in assets employed. Financial efficiency **ratios**: stock **turnover** **Inventory** or stock **turnover** measures how quickly stock is converted into sales. **Inventory** **turnover** = cost of sales ÷ average **inventories** held This shows the number of times per year that a firm sells its stock. For example: **Inventory** **turnover** of 4 means that a firm sells its stock __ times a year (i/

the year. = 12.73 times $140,000 ($10,000 + $12,000) ÷ 2 **Inventory** **Turnover** = #5 17-21 **Inventory** **Turnover** Cost of Goods Sold Average **Inventory** **Inventory** **Turnover** = Would 5 be a desirable number of times for **inventory** to **turnover**? = 12.73 times $140,000 ($10,000 + $12,000) ÷ 2 **Inventory** **Turnover** = #5 17-22 Equity, or Long–Term Solvency **Ratios** This is part of the information to calculate the equity, or long/

to emulate. Comparison to industry averages is also popular, as in the following example. © 2012 Pearson Prentice Hall. All rights reserved. 3-19 Using Financial **Ratios**: Types of **Ratio** Comparisons (cont.) Caldwell Manufacturing ’ s calculated **inventory** **turnover** for 2012 and the average **inventory** **turnover** were as follows: **Inventory** **turnover**, 2012 Caldwell Manufacturing14.8 Industry average 9.7 © 2012 Pearson Prentice Hall. All rights reserved. 3-20 Using Financial/

investment. Assets management—Working Capital Cycle **Ratios** **Inventory** **Turnover** Measures the annual rate at which the **inventory** is sold. **Inventory** Days Converts **inventory** rate to “days **inventory** is on hand” Sales / **Inventory** = **Inventory** **Turnover** The days in the period can then be divided by the **inventory** **turnover** formula to calculate the days it takes to sell the **inventory** on hand or "**inventory** **turnover** days". Accounts Receivable **Turnover** R/A **Turnover** Measures the annual rate at which accounts/

-of-cost-or-market, the store calculates its ending **inventory** balance. 6-32 32 **Inventory** **turnover** **ratio** LO8 Analyze management of **inventory** using the **inventory** **turnover** **ratio** and gross profit **ratio** If managers purchase too much **inventory**, the company runs the risk of the **inventory** becoming obsolete and market value falling below cost. Analysts as well as managers often use the **inventory** **turnover** **ratio** to evaluate a company’s effectiveness in managing its investment/

cost of goods sold **Inventory** **turnover** **ratio** Average collection period Fixed assets turn over **ratio** 8/18/201525 Measures No of times **inventory** turned over in a year OR No of days of **inventory** held by company to sp sales Times **Inventory** turned over = Net sales OR COGS Avg **inventory** Avg stocks **Inventory** measured in days of sale = 365 x Avg **inventory** Net Sales **INVENTORY** TURN OVER **RATIO** 8/18/201526 A/

effectively it is putting its resources to work. 6. Average **Inventory** **Turnover** **Ratio** - Tells the average number of times a firms **inventory** is “turned over” or sold out during the accounting period. Average **Inventory** = Cost of Goods Sold = $1,290,117 = 2.05 times **Turnover** **Ratio** Average **Inventory*** $630,600 a year *Average **Inventory** = Beginning **Inventory** + Ending **Inventory** 2 Twelve Key **Ratios** Operating **Ratios** - Evaluate a firm’s overall performance and show how/

in receivables) Financial Accounting Dave Ludwick, P.Eng, MBA, PMP, PhD Efficiency **Inventory** **Turnover** = COGS/Average **Inventory** –Where average **inventory** = (beginning **inventory** + ending **inventory**)/2 –Measures the number of times the **inventory** is turned over –Generally, a high **inventory** **turnover** is an indicator of good **inventory** management. –But a high **ratio** can also mean there is a shortage of **inventory**, which may mean the company may miss a sale due to an/

longer time than its competitors (Competitors = 365/7 = 52 days). www.ahmadsubagyo.com18 Davis vs. Peer Group: Question #1 Summary RatioDavisPeers Current **Ratio** 1.671.80 Quick **Ratio**.88.94 Avg. Collection Period 21.925 **Inventory** **Turnover** (days in **inventory**) 5.48 (67)7 (52) www.ahmadsubagyo.com19 Are the Firms’ Managers Generating Adequate Operating Profits on the Firm’s Assets? This question focuses on/

. Comparison to industry averages is also popular, as in the following example. © 2012 Pearson Prentice Hall. All rights reserved. 3-20 Using Financial **Ratios**: Types of **Ratio** Comparisons (cont.) Caldwell Manufacturing ’ s calculated **inventory** **turnover** for 2012 and the average **inventory** **turnover** were as follows: **Inventory** **turnover**, 2012 Caldwell Manufacturing14.8 Industry average 9.7 © 2012 Pearson Prentice Hall. All rights reserved. 3-21 Table 3.5 Financial/

Receivable Debtors Collection Period = Months or days in a year Debtors **turnover** or Accounts receivable Average Monthly or daily Credit sales Fixed Assets **Turnover** **Ratio** = Cost of Goods Sold Net Fixed Assets Calculate the following **ratios** for YE March2009 & 2010 a)Return on Capital Employed (b) Current **Ratio** © Debt Equity **Ratio** (d) Fixed Assets **Turnover** **Ratio** (e) **Inventory** **Turnover** **Ratio** (f) Earning Per Share Balance Sheets as at 31 st March/

,500 ($133,000 + $115,500) / 2 = 8.1 times Cost of Good Sold Average **Inventory** **Inventory** **Turnover** = Liquidity **Ratios** Chapter 18-9 LO 5 Identify and compute **ratios** used in analyzing a firm’s liquidity, profitability, and solvency. **Ratio** Analysis A variant of **inventory** **turnover** is the days in **inventory**. **Inventory** **turnover** **ratios** vary considerably among industries. Liquidity **Ratios** 365 days / 8.1 times = every 45.1 days $1,011,500 ($133,000/

’s capital requirements(both operating and long-term). activity **ratios** Short-term (operating) activity **ratios** Long-term (investment) activity **ratios** **inventory** receivables payables Working capital Fixed assets Total assets Short-term( operating) activity **ratios**: (1) **Inventory** **Turnover**: Measure the efficiency of the firm’s **inventory** management. This **ratio** is affected by the choice of accounting method. 部分行业存货周转率 Average No. Days of **Inventory** in Stock= Selected financial information from Macon Resources/

199919981997Ind. CR1.85x1.1x2.3x2.7x QR0.67x0.4x0.8x1.0x 5 - 13 What is the **inventory** **turnover** **ratio** vs. the industry average? Inv. **turnover**= = = 3.34x. COGS **Inventories** $5,728 $1,716 199919981997Ind. Inv. T.3.34X4.45x4.0x6.1x 5 - 14 **Inventory** **turnover** is below industry average. Cajun Made might have old **inventory**, or its control might be poor. No improvement is currently forecasted. Comments on/

760 18,320 = 6.16 times What is the firm’s **Inventory** **Turnover**? cost of goods sold **inventory** What is the firm’s **Inventory** **Turnover**? 85,300 27,530 = 3.10 times What is the firm’s **Inventory** **Turnover**? CyberDragon turns their **inventory** over 3.1 times per year. The industry average is 3/ x /(1- ) The DuPont Model ROE = x / (1- ) = x /(1- ) = 14.6% Net Profit Total Asset Debt Margin **Turnover** **Ratio** Net Income Sales Total Debt Sales Total Assets Total Assets 5,016 112,760 47,523 112,760 81,890 81,890 The DuPont Model

,000 Tax 20,000 Net Income of Net Profit After tax 25,000 Dividends 10,000 Retained Earnings 15,000 12/13/2015rd39 **Inventory** **turnover** **ratio** **Inventory** **turnover** **ratio** = sales average **inventory** balance = 300,000/1860 = 161.29 times Measures how many times the company sold and replaced its **inventory** over a specific period. The average is usually calculated over 2 years. 12/13/2015rd40 Times-Interest-Earned/

creditors such as bankers and suppliers are particularly interested in assessing liquidity. The **ratios** we can use to determine the enterprise’s short-term debt-paying ability are the current **ratio**, the acid-test **ratio**, receivables **turnover**, and **inventory** **turnover**. Common measures of liquidity **ratios** are Current **Ratio** Acid test **ratio** Receivable **turnover** **ratio** **Inventory** **turnover** **ratio** 1. CURRENT **RATIO** The current **ratio** is a widely used measure for evaluating a company’s liquidity and short/

Comments on current **ratio** 2003 2002 2001 Ind. Current **ratio** 2.34x 1.20x 2.30x 2.70x Expected to improve but still below the industry average. Liquidity position is weak. What is the **inventory** **turnover** vs. the industry average? Inv. **turnover** = Sales / **Inventories** = $7,036 / $1,716 = 4.10x 2003 2002 2001 Ind. **Inventory** **Turnover** 4.1x 4.70x 4.8x 6.1x Comments on **Inventory** **Turnover** **Inventory** **turnover** is below/

in flood $ 26,250 Chapter Objective 7 Use the gross margin percentage and the **inventory** **turnover** **ratio** to evaluate a business Analyzing Financial Statements Two important **ratios** used to measure merchandiser’s success Analyzing Financial Statements 1 Gross margin percentage Analyzing Financial Statements 2 **Inventory** **turnover** Analyzing Financial Statements Gross margin percentage measures average percentage of gross profit generated by one dollar of sales Changes in/

the screen in its financial statements (in millions): Part II Requirement 1. Calculate to one decimal place the **inventory** **turnover** **ratio** and average days to sell **inventory** for 2010, 2009, and 2008. The **Inventory** **Turnover** **Ratio** is equal to Cost of Goods sold divided by Average **Inventory**. For example, in 2010, the **Inventory** **Turnover** **Ratio** of 6.8 is obtained by dividing Cost of Goods sold of $1,502 by Average/

weak. 4-10 What is the **inventory** **turnover** vs. the industry average? 2006E20052004Ind. **Inventory** **Turnover** 4.1x4.70x4.8x6.1x Inv. **turnover** = Sales / **Inventories** = $7,036 / $1,716 = 4.10x 4-11 Comments on **Inventory** **Turnover** **Inventory** **turnover** is below industry average. D’Leon might have old **inventory**, or its control might be poor. No improvement is currently forecasted. 4-12 Fixed assets and total assets **turnover** **ratios** vs. the industry average FA/

2.30x 2.70x Quick **Ratio** 0.84x 0.39x 0.85x 1.00x Expected to improve but still below the industry average. Liquidity position is weak. What is the **inventory** **turnover** vs. the industry average? Inv. **turnover** = Sales / **Inventories** = $7,036 / $1,716 = 4.10x 2006E 2005 2004 Ind. **Inventory** **Turnover** 4.1x 4.70x 4.8x 6.1x Comments on **Inventory** **Turnover** **Inventory** **turnover** is below industry average. D/

LESSON 6-3 CENTURY 21 ACCOUNTING © Thomson/South-Western MERCHANDISE **INVENTORY** **TURNOVER** The number of times the average amount of merchandise **inventory** is sold during a specific period of time is called the merchandise **inventory** **turnover** **ratio** A merchandise **inventory** **turnover** **ratio** expresses a relationship between an average **inventory** & the cost of merchandise sold A low merchandise **inventory** **turnover** **ratio** usually indicates a low return on investment 3 LESSON 6-3 CENTURY 21/

its assets? How much does firm have tied up in assets for each dollar of sales? 16 **Inventory** **Turnover** **Ratio** vs. Industry Average Inv. **turnover**= = = 4.10. Sales **Inventories** $7,036 $1,716 2011E20102009Ind. Inv. T.4.14.54.86.1 17 Comments on **Inventory** **Turnover** **Inventory** **turnover**: Firm might have old **inventory**, or its control might be poor. No improvement is currently forecasted. Below industry average 18 DSO= = = 45/

obligations. © 2012 Pearson Prentice Hall. All rights reserved. **Ratio** Analysis (cont.) Liquidity **Ratios** The quick **ratio** for Bartlett Company in 2012 is: The liquidity **ratio** above provides a better measure than the current **ratio** only when **inventory** cannot be easily converted to cash. © 2012 Pearson Prentice Hall. All rights reserved. **Ratio** Analysis (cont.) Activity **Ratios**: **Inventory** **turnover** = Cost of goods sold ÷ **Inventory** Applying this relationship to Bartlett Company in 2012 yields/

**Ratio** Industry Average Current **Ratio** 2.200 Quick **Ratio** (or Acid Test **Ratio**) 1.500 Cash **Ratio** 0.135 Debt **Ratio** 0.430 Cash Coverage 10.600 Days’ Sales in Receivables 29.000 Total Asset **Turnover** 2.800 **Inventory** **Turnover** 20.100 Days’ Sales in **Inventory** 11.500 Receivables **Turnover**/ have much of a problem. Asset management: Tri-Mark’s asset **turnover** **ratios** are all below the average. It needs to tighten up collections and manage its **inventory** more efficiently. Profitability: Tri-Mark has a good control on cost of/

the FA **turnover** and TA **turnover** **ratios** 200320022001Ind. FA TO8.66.410.07.0 TA TO2.02.12.32.6 FA **turnover** projected to exceed the industry average. TA **turnover** below the industry average. Caused by excessive currents assets (A/R and Inv). 4-16 Lecture 4-350 What is the **inventory** **turnover** vs. the industry average? 200320022001Ind. **Inventory** **Turnover** 4.14.704.86.1 Inv. **turnover** = Sales / **Inventories** = $7,036/

group of competitors that it wishes to emulate. Comparison to industry averages is also popular, as in the following example. © 2012 Pearson Education 3-15 Using Financial **Ratios**: Types of **Ratio** Comparisons (cont.) Caldwell Manufacturing ’ s calculated **inventory** **turnover** for 2012 and the average **inventory** **turnover** were as follows: **Inventory** **turnover**, 2012 Caldwell Manufacturing14.8 Industry average 9.7 © 2012 Pearson Education 3-16 Table 3.5 Financial/

CR and QR 2005E20042003Ind. CR2.58x1.46x2.3x2.7x QR0.93x0.5x0.8x1.0x What is the **inventory** **turnover** **ratio** as compared to the industry average? Inv. **turnover**= = = 4.10x. Sales **Inventories** $7,036 $1,716 2005E20042003Ind. Inv. T.4.1x4.5x4.8x6.1x **Inventory** **turnover** is below industry average. Firm might have old **inventory**, or its control might be poor. No improvement is currently forecasted. Comments on/

net credit sales/avrg accounts receivable (60) receivable collection period = 365/accounts receivable **turnover** (60)receivable collection period = 365/accounts receivable **turnover** (60) **inventory** **turnover** = cost of goods sold/ avrg inventoryinventory **turnover** = cost of goods sold/ avrg **inventory** **inventory** collection period = 365/**inventory** **turnover** **ratio** (60)**inventory** collection period = 365/**inventory** **turnover** **ratio** (60) fixed assets turover = sales/ (net) fixed assetsfixed assets turover = sales/ (net) fixed/

effectively it is putting its resources to work. Average **Inventory** **Turnover** **Ratio** - Tells the average number of times the firm’s **inventory** is “turned over” or sold out during the accounting period. Average **Inventory** = Cost of Goods Sold = $1,290.117 = 2.05 times **Turnover** **Ratio** Average **Inventory*** $630,600 a year *Average **Inventory** = Beginning **Inventory** + Ending **Inventory** 2 Twelve Key **Ratios** Operating **Ratios** - Evaluate the firm’s overall performance and show how/

capital + Reserves (R.E) Efficiency **Ratio** **Inventory** **turnover** Cost of goods sold / Average **inventory** In general a high **inventory** **turnover** **ratio** is better. It shows good **inventory** management. A very high **ratio** calls for careful analysis, as it may mean very low level of **inventory** A very low **ratio** signifies excessive **inventory**. Firms should have neither too high nor too low **inventory** **turnover**. Efficiency **Ratio** Contd.. Avg. No. of days **inventory** is sold (Stock held / cost/

in 2012 (67.6 days to sell). Both companies use the same **inventory** costing method (FIFO). The **inventory** **turnover** **ratio** reflects how many times average **inventory** was acquired and sold during the year. The **inventory** **turnover** **ratio** for Polaris Industries has been consistent throughout 2010 to 2012. Polaris is performing better than Arctic Cat, where the **inventory** **turnover** is 5.4 times per year or every 67.6 days. 7/

4 Categories of **Ratios** Profitability **Ratios** Asset Utilization **Ratios** Liquidity **Ratios** Debt Utilization **Ratios** Classification System We will separate 13 significant **ratios** into four primary categories. A. Profitability **Ratios**. 1. Profit margin. 2. Return on assets (investment). 3. Return on equity. B. Asset utilization **ratios**. 4. Receivable **turnover**. 5. Average collection period. 6. **Inventory** **turnover**. 7. Fixed asset **turnover**. 8. Total asset **turnover**. C. Liquidity **ratios**. 9. Current **ratio**. 10. Quick **ratio**. D/

cash. The **inventory** **turnover** **ratio** The **inventory** **turnover** **ratio** is obtained by dividing the Total Sales of a company by its Total **Inventory**. The **ratio** is regarded as a test of Efficiency and indicates the “quickness” with which the company is able to move its merchandise. **Inventory** **turnover** **ratio** example The formula: **Inventory** **Turnover** **Ratio** = Net Sales / **Inventory** An example: Net Sales = $727,116 (from Income Statement) Total **Inventory** = $156,822 (from Balance sheet ) **Inventory** **Turnover** **Ratio** = $727,116/

control Creditors would like it less than 1 since the company is financed more by owners than creditors What is this **ratio**? Cost of Goods Sold Average **inventory** A. **Inventory** **Turnover** B. Accounts Receivable **Turnover** C. Price Earnings **Ratio** D. Debt to Equity **Inventory** **Turnover** How many times **inventory** has been bought and sold during the year. 4.0 Times would mean it is sold once a quarter. 12/

liabilities $698.2 / $279.9 = 2.49 8 Quick **Ratio** (Current assets - **inventory**) / current liabilities ($698.2 - $373.9) / $279.9 = 1.16 VII. **Ratio** Analysis I.Activity **Ratios** – How fast a company is turning its assets into cash 1. **Inventory** **Turnover** a) Speed to which **inventory** is sold (1) Sales (Cost of Goods Sold)/ average **inventory** 2. Receivables **Turnover** a) Speed with which accounts receivables are collected (1/

payable period –Credit check ®2002 Prentice Hall Publishing 11 Liquidity of **Inventories** **Inventory** **turnover** ratioInventory **turnover** **ratio** –Higher the **inventory** **turnover** More efficient the **inventory** managementMore efficient the **inventory** management Frequent stockouts?Frequent stockouts? Too many small orders?Too many small orders? –**Turnover** **ratio** is relatively low Slow-moving inventorySlow-moving **inventory** ObsolescenceObsolescence –Investigate perceived inefficiency ®2002 Prentice Hall Publishing 12 Debt/

. 3-11 What is the **inventory** **turnover** vs. the industry average? 200320022001Ind. **Inventory** **Turnover** 4.1x???4.8x6.1x Inv. **turnover** = Sales / **Inventories** = $7,035600 / $1,716,480 = 4.10x 3-12 Comments on **Inventory** **Turnover** **Inventory** **turnover** is below industry average. The company might have old **inventory**, or its control might be poor. No improvement is currently forecasted. 3-13 Fixed asset and total asset **turnover** **ratios** vs. the industry average FA/

that if it needs to borrow long-term debt it should not have much of a problem. Asset management: Tri-Mark’s asset **turnover** **ratios** are all below the average. It needs to tighten up collections and manage its **inventory** more efficiently. Profitability: Tri-Mark has a good control on cost of goods sold. Its net profit margin is better than that of/

is weak. What is the **inventory** **turnover** vs. the industry average? 2006E20052004Ind. **Inventory** **Turnover** 4.1x4.70x4.8x6.1x Inv. **turnover** = Sales / **Inventories** = $7,036 / $1,716 = 4.10x Comments on **Inventory** **Turnover** **Inventory** **turnover** is below industry average. D’Leon might have old **inventory**, or its control might be poor. No improvement is currently forecasted. Fixed assets and total assets **turnover** **ratios** vs. the industry average FA **turnover**= Sales / Net fixed assets = $7/

weak. Comments on CR and QR 2002E20012000Ind. CR1.85x1.1x2.3x2.7x QR0.67x0.4x0.8x1.0x 3 - 11 Copyright © 2002 Harcourt, Inc.All rights reserved. What is the **inventory** **turnover** **ratio** as compared to the industry average? Inv. **turnover**= = = 4.10x. Sales **Inventories** $7,036 $1,716 2002E20012000Ind. Inv. T.4.1x4.5x4.8x6.1x 3 - 12 Copyright © 2002 Harcourt, Inc.All rights reserved/

: Retail Method; Gross Profit Method; **Inventory** **Turnover**; Distribution of Overhead Calculate the cost **ratio** and ending **inventory** at cost for the retail method. Calculate the estimated **inventory** using the gross profit method. Explain and calculate **inventory** **turnover**. Explain overhead; allocate overhead according to floor space and sales. 18- **Inventory** Systems Perpetual **Inventory** System – Keeps a running account of **inventory** by updating with each transaction. Periodic **Inventory** System – Relies on a physical/

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