What do the numbers mean

Hasbro takes more than 50 days to sell all its inventory, and Mattel sells out every 46.4 days. Mattel turns over its inventory about 8 times a year, while Hasbro turns it over around 7 times per year. To judge how well both companies are doing, check the averages for the industry — you can do so online at Bizstats (http://bizstats.com/inventory.htm). Using the stats for Miscellaneous Manufacturing, I find that 8.15 is the average inventory turnover ratio in the industry. So Mattel is slightly below average at 7.87, and Hasbro, at only 6.82, has some room for improvement.

^ If the company you're evaluating has a slower than average inventory turn-y^jL over, look for explanations in the management's discussion and analysis and ■ VQJ ■ the notes to the financial statements to find out why the company is performing worse than its competitors. If the rate is higher, look for explanations for that as well; don't get too excited until you know the reason why. The better numbers may be because of a one-time inventory change.

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