Days in inventory and asset turnover ratio
In this exercise, we will calculate the time it takes for a company to turn inventory into sales (days in inventory or DII ratio) and a ratio to calculate the efficiency of a company’s assets by seeing how the company uses its assets to generate sales (asset turnover ratio). The required formulas are:
\(DII = \frac{Average\,Inventory}{Total\,Cost\,of\,Goods\,Sold} \times Days\,in\,Financial\,Year\)
\(Total\,Average\,Assets = {(Opening\,Balance\,+\,Closing\,Balance)/2}\)
\(Asset\,Turnover = \frac{Sales}{Total\,Average\,Assets}\)
The following are preloaded:
| Metric | Variable | Value |
|---|---|---|
| Total COGS | cogs_tot |
4000 |
| Average Inventory | av_inv |
1900 |
| Total Sales | sales_tot |
10000 |
| Opening balance Assets | ob_assets |
2000 |
| Closing balance Assets | cb_assets |
7000 |
This exercise is part of the course
Financial Forecasting in Python
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
# Calculate the dii ratio
____ = (____/____)*365
# Print the result
print("The DII ratio is {}.".format(____))