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Microsoft Excel LibreOffice Calc


Analysis of Inventory

Difficulty: Advanced


Inventory Accounting Policy

Inventories include the costs of material, labor and overhead. Domestic inventories are stated at the lower of cost or market primarily using the first-in, first-out ("FIFO") method with certain businesses applying the last-in, first-out method ("LIFO") to value inventory. Inventories held outside the United States are stated at the lower of cost or market primarily using the FIFO method.

Source: Danaher Corp., Annual Report


Inventory Disclosure

Danaher Corp., Statement of Financial Position, Inventory

USD $ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Finished goods hidden hidden hidden hidden hidden
Work in process hidden hidden hidden hidden hidden
Raw materials hidden hidden hidden hidden hidden
Inventories hidden hidden hidden hidden hidden

Source: Based on data from Danaher Corp. Annual Reports

Item Description The company
Finished goods Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale. Danaher Corp.'s finished goods declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.
Work in process Carrying amount as of the balance sheet date of merchandise or goods which are partially completed, are generally comprised of raw materials, labor and factory overhead costs, and which require further materials, labor and overhead to be converted into finished goods, and which generally require the use of estimates to determine percentage complete and pricing. Danaher Corp.'s work in process declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.
Raw materials Carrying amount as of the balance sheet date of unprocessed items to be consumed in the manufacturing or production process. Also includes purchased parts that will be used as components of a finished product. Danaher Corp.'s raw materials declined from 2015 to 2016 but then slightly increased from 2016 to 2017.
Inventories Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer). Danaher Corp.'s inventories declined from 2015 to 2016 but then slightly increased from 2016 to 2017.

Adjustment to Inventory: from LIFO to FIFO

Adjusting LIFO Inventory to FIFO (Current) Cost

USD $ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Adjustment to Inventories
Inventories at LIFO (as reported) hidden hidden hidden hidden hidden
Add: Inventory LIFO reserve hidden hidden hidden hidden hidden
Inventories at FIFO (adjusted) hidden hidden hidden hidden hidden
Adjustment to Current Assets
Current assets (as reported) hidden hidden hidden hidden hidden
Add: Inventory LIFO reserve hidden hidden hidden hidden hidden
Current assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden
Add: Inventory LIFO reserve hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to Total Danaher Stockholders' Equity
Total Danaher stockholders' equity (as reported) hidden hidden hidden hidden hidden
Add: Inventory LIFO reserve hidden hidden hidden hidden hidden
Total Danaher stockholders' equity (adjusted) hidden hidden hidden hidden hidden
Adjustment to Net Earnings
Net earnings (as reported) hidden hidden hidden hidden hidden
Add: Increase (decrease) in inventory LIFO reserve hidden hidden hidden hidden hidden
Net earnings (adjusted) hidden hidden hidden hidden hidden

Danaher Corp.'s inventory value on Dec 31, 2017 would be $1,840,800  (in thousands) if the FIFO inventory method was used instead of LIFO. Danaher Corp.'s inventories, valued on a LIFO basis, on Dec 31, 2017 were $1,840,800 . Danaher Corp.'s inventories would have been $– higher than reported on Dec 31, 2017 if the FIFO method had been used instead.


Adjusted Ratios: LIFO vs. FIFO (Summary)

Danaher Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Current Ratio
Reported current ratio (LIFO) hidden hidden hidden hidden hidden
Adjusted current ratio (FIFO) hidden hidden hidden hidden hidden
Net Profit Margin
Reported net profit margin (LIFO) hidden% hidden% hidden% hidden% hidden%
Adjusted net profit margin (FIFO) hidden% hidden% hidden% hidden% hidden%
Total Asset Turnover
Reported total asset turnover (LIFO) hidden hidden hidden hidden hidden
Adjusted total asset turnover (FIFO) hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage (LIFO) hidden hidden hidden hidden hidden
Adjusted financial leverage (FIFO) hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE (LIFO) hidden% hidden% hidden% hidden% hidden%
Adjusted ROE (FIFO) hidden% hidden% hidden% hidden% hidden%
Return on Assets (ROA)
Reported ROA (LIFO) hidden% hidden% hidden% hidden% hidden%
Adjusted ROA (FIFO) hidden% hidden% hidden% hidden% hidden%
Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Danaher Corp.'s adjusted current ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Danaher Corp.'s adjusted net profit margin deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Danaher Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Danaher Corp.'s adjusted financial leverage declined from 2015 to 2016 and from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Danaher Corp.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Danaher Corp.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Current assets (USD $ in thousands) hidden hidden hidden hidden hidden
Current liabilities (USD $ in thousands) hidden hidden hidden hidden hidden
Current ratio1 hidden hidden hidden hidden hidden
Adjusted: from LIFO to FIFO
Adjusted current assets (USD $ in thousands) hidden hidden hidden hidden hidden
Current liabilities (USD $ in thousands) hidden hidden hidden hidden hidden
Adjusted current ratio2 hidden hidden hidden hidden hidden

2017 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Danaher Corp.'s adjusted current ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net earnings (USD $ in thousands) hidden hidden hidden hidden hidden
Sales (USD $ in thousands) hidden hidden hidden hidden hidden
Net profit margin1 hidden% hidden% hidden% hidden% hidden%
Adjusted: from LIFO to FIFO
Adjusted net earnings (USD $ in thousands) hidden hidden hidden hidden hidden
Sales (USD $ in thousands) hidden hidden hidden hidden hidden
Adjusted net profit margin2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 Net profit margin = 100 × Net earnings ÷ Sales
= 100 × hidden ÷ hidden = hidden%

2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Sales
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Danaher Corp.'s adjusted net profit margin deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Sales (USD $ in thousands) hidden hidden hidden hidden hidden
Total assets (USD $ in thousands) hidden hidden hidden hidden hidden
Total asset turnover1 hidden hidden hidden hidden hidden
Adjusted: from LIFO to FIFO
Sales (USD $ in thousands) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in thousands) hidden hidden hidden hidden hidden
Adjusted total asset turnover2 hidden hidden hidden hidden hidden

2017 Calculations

1 Total asset turnover = Sales ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Sales ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Danaher Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Total assets (USD $ in thousands) hidden hidden hidden hidden hidden
Total Danaher stockholders' equity (USD $ in thousands) hidden hidden hidden hidden hidden
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted: from LIFO to FIFO
Adjusted total assets (USD $ in thousands) hidden hidden hidden hidden hidden
Adjusted total Danaher stockholders' equity (USD $ in thousands) hidden hidden hidden hidden hidden
Adjusted financial leverage2 hidden hidden hidden hidden hidden

2017 Calculations

1 Financial leverage = Total assets ÷ Total Danaher stockholders' equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Danaher stockholders' equity
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Danaher Corp.'s adjusted financial leverage declined from 2015 to 2016 and from 2016 to 2017.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net earnings (USD $ in thousands) hidden hidden hidden hidden hidden
Total Danaher stockholders' equity (USD $ in thousands) hidden hidden hidden hidden hidden
ROE1 hidden% hidden% hidden% hidden% hidden%
Adjusted: from LIFO to FIFO
Adjusted net earnings (USD $ in thousands) hidden hidden hidden hidden hidden
Adjusted total Danaher stockholders' equity (USD $ in thousands) hidden hidden hidden hidden hidden
Adjusted ROE2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROE = 100 × Net earnings ÷ Total Danaher stockholders' equity
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROE = 100 × Adjusted net earnings ÷ Adjusted total Danaher stockholders' equity
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Danaher Corp.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net earnings (USD $ in thousands) hidden hidden hidden hidden hidden
Total assets (USD $ in thousands) hidden hidden hidden hidden hidden
ROA1 hidden% hidden% hidden% hidden% hidden%
Adjusted: from LIFO to FIFO
Adjusted net earnings (USD $ in thousands) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in thousands) hidden hidden hidden hidden hidden
Adjusted ROA2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROA = 100 × Net earnings ÷ Total assets
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROA = 100 × Adjusted net earnings ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Danaher Corp.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.