Annual Report for T-Mobile

Inventory turnover

2019 12.34x

2020 9.39x

Days Sales in Inventory

2019 30 days

2020 39 days

The corporation restocked its sales inventories more quickly in 2019 than in 2020. They have fewer lists in 2019 than they will in 2020, which is why. This indicates that the business had an excess of inventories in 2019. In both years, their inventory turnover was comparable to the industry average. Their performance is 300 times worse than the industry standard. As a result, the company will still need more inventory in 2020, but the maintained stock level is about right for the demand.

In contrast, it takes the corporation 30 days to replace its sold-out stocks, compared to 39 days in 2020. The gap between their day’s sales in inventory and the industry average is modest if they fall short of the industry average for inventory turnover. The interpretation remains consistent with the rotation of the merchandise. Since some goods are difficult to sell, the inventory balance will be higher in 2020.

The company’s stocks include wireless accessories and equipment. They are valued using a typical inventory valuation method for their subsequent measurement, which uses the lower cost and net realizable value. Inventories are first valued using the standard price. All returned gadgets are added to the list because buyers upgrade the purchased item. Since this is a sales return transaction, any output will be added to the inventory.

Additionally, the business rented its equipment to a third party. The property and equipment list will be updated to reflect these leased items. The hired instruments are returned to the business and included in the inventory balance. And lastly, Brightstar is a division of T-Mobile. The inventory will stay with T-Mobile until it is sold to a third party if there is an intercompany inventory transaction between them, particularly a downstream sale. T-Mobile still has to transfer the products to Brightstar after making the sale to Brightstar. Consolidation allows for the elimination of any unrealized profit. As a result, Brightstar is required to keep the T-Mobile inventory it purchased. Consolidation will eliminate the intercompany sales-related unrealized gain recorded on the closing list. If sold to a third party, it will be regarded as realized.

As an investor, I want to acknowledge that the quantity listed in their inventory is accurate. The equities are later recognized at lower cost and net realizable value per IAS 2, as they do. Because parts of their lists are returned, this extends to how they handle them. Since returned items are not in the same condition as brand-new items, their cost must be written down to reflect their retail worth, also known as net realizable value. The company’s stock value will be more accurate if it transfers the merchandise sold to Brightstar. The business runs its store well because they follow the requirements and norms.

References

2020 financial statement (since it is comparative, 2019 data are also in here): https://sec.report/Document/0001283699-21-000039/#ie0b8126e3561405d804a366b3fab7a31_13

The industry average for days sales in inventory: https://www.readyratios.com/sec/industry/48/

The industry average for inventory turnover: https://csimarket.com/Industry/industry_Efficiency.php?ind=905&hist=4

Inventory turnover = Cost of goods sold / Average inventory

2019

Inventory turnover = $11,899 / $964

Inventory turnover = 12.34x

2020

Inventory turnover = $16,388 / [($2,527 + $964) /2]

Inventory turnover = 9.39x

Days Sales in Inventory = (Average inventory / Cost of goods sold) x 365 days

2019

Days Sales in Inventory = ($964 / $11,899) x 365

Days Sales in Inventory = 30 days

2020

Days Sales in Inventory = {[($2,527 + $964) / 2] / $16,388} x 365

Days Sales in Inventory = 39 days

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Before beginning work on this discussion forum, read Chapter 7 in the course textbook, Using Financial Accounting.

You may consider using the same company and annual reports that you chose in your Week 1 – Discussion Forum, Reading, and Using the Annual Report Case Study. This choice will only work if the company generates the bulk of its revenue from selling goods and maintains inventory. If not, you must select another company for this analysis. Choose a company that a fellow student has not already posted.

Address the following:

• Calculate the inventory turnover ratio and several days’ sales in inventory for the company for the latest two years. Obtain the industry averages for these ratios and any other pertinent information from the Mergent OnlineLinks to an external site. Database, available through the UAGC Library, or use another outside resource, and then analyze the results. Be sure to show your calculations.
  • Review the How to Find Industry Ratios and Averages Using Mergent OnlineLinks to an external site if needed. Tutorial on how to use the Mergent OnlineLinks to an external site. Database.
• Discuss what each of these ratios tells you about the company’s efficiency in managing its inventory and how they compare to the industry average.
• Identify the major causes of any changes in these ratios and discuss your assessment of the company based on these changes.
• As an investor, explain whether or not you are satisfied with the company’s inventory management.Your initial response should be a minimum of 200 words. Graduate school students learn to assess the perspectives of several scholars. Support your response with at least one scholarly or credible resource besides the text. Cite your sources in APA Style with in-text citations and a reference list. The Writing Center’s APA: Citing Within Your PaperLinks to an external site. And APA: Formatting Your References ListLinks to an external site. Provide instructions and examples.

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