Normalized inventory change rate
factor.formula
Normalized inventory change rate =
Average Total Assets =
This factor is calculated by calculating the difference between the inventory in the reporting period and the inventory in the same period of the previous year, and then dividing it by the average total assets in the reporting period to obtain the standardized inventory change rate. This ratio is used to measure the relative size of a company's inventory changes, eliminating the impact of the company's size.
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Inventory amount at the end of the reporting period
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Inventory amount at the end of the previous year
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Total assets at the end of the reporting period
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Total assets at the end of the previous year
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Average total assets during the reporting period, which is the average of total assets at the end of the reporting period and total assets at the end of the same period last year
factor.explanation
This factor is based on empirical research and found that inventory changes can reflect the company's short-term demand changes and future profitability. An increase in inventory may indicate a decline in the company's future profitability or a slowdown in demand. Conversely, a decrease in inventory may indicate an increase in future profitability or a rebound in demand. Therefore, this factor is often used to capture the market's revision of the company's future earnings expectations and may serve as a signal for a reversal strategy. It should be noted that inventory management strategies vary greatly among industries and companies, and industry and company characteristics need to be considered when using this factor.