Hey guys,
I've got some trouble modelling the inventory of a retail (softline) company. From CapIQ, I could get an estimate of the inventory turnover (~3) and I started using the "basic" formula: IT = 2*COGS/(ending + beginning inv.)
But when I project out the balance sheet using this formula (and the fact that beginning inv @ N+1 = ending inv @ N), it results in an inventory which oscillates like crazy around the general trend. This is weird, and I can't really come up with a convincing explanation...
Have you guys already seen that? What's your advise on that? What's the common way of modelling inventories?
Thanks
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