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Microsoft Excel LibreOffice Calc


Analysis of Inventory

Difficulty: Advanced


Inventory Accounting Policy

Inventories are stated at the lower of cost or net realizable value. The method of determining cost for each subsidiary varies among last-in, first-out ("LIFO"); first-in, first-out ("FIFO"); and average cost, and is used consistently from year to year. At December 31, 2017, approximately 18 percent, 63 percent and 19 percent of DowDuPont's inventories were accounted for under the LIFO, FIFO and average cost methods, respectively. At December 31, 2016, approximately 28 percent, 62 percent and 10 percent of DowDuPont's inventories were accounted for under the LIFO, FIFO and average cost methods, respectively.

DowDuPont routinely exchanges and swaps raw materials and finished goods with other companies to reduce delivery time, freight and other transportation costs. These transactions are treated as non-monetary exchanges and are valued at cost.

Source: DowDuPont Inc., Annual Report


Inventory Disclosure

DowDuPont Inc., Statement of Financial Position, Inventory

USD $ in millions

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
Supplies hidden hidden hidden hidden hidden
FIFO inventories hidden hidden hidden hidden hidden
Adjustment of inventories to a LIFO basis hidden hidden hidden hidden hidden
Inventories hidden hidden hidden hidden hidden

Source: Based on data from DowDuPont Inc. 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. DowDuPont Inc.'s finished goods increased from 2015 to 2016 and from 2016 to 2017.
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. DowDuPont Inc.'s work in process increased from 2015 to 2016 and from 2016 to 2017.
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. DowDuPont Inc.'s raw materials increased from 2015 to 2016 and from 2016 to 2017.
Supplies Carrying amount as of the balance sheet date of products used directly or indirectly in the manufacturing or production process, which may or may not become part of the final product. May also include items used in the storage, presentation or transportation of physical goods. DowDuPont Inc.'s supplies increased from 2015 to 2016 and 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). DowDuPont Inc.'s inventories increased from 2015 to 2016 and from 2016 to 2017.

Adjustment to Inventory: from LIFO to FIFO

Adjusting LIFO Inventory to FIFO (Current) Cost

USD $ in millions

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 DowDuPont's Stockholders' Equity
DowDuPont's stockholders' equity (as reported) hidden hidden hidden hidden hidden
Add: Inventory LIFO reserve hidden hidden hidden hidden hidden
DowDuPont's stockholders' equity (adjusted) hidden hidden hidden hidden hidden
Adjustment to Net Income Attributable To DowDuPont Inc.
Net income attributable to DowDuPont Inc. (as reported) hidden hidden hidden hidden hidden
Add: Increase (decrease) in inventory LIFO reserve hidden hidden hidden hidden hidden
Net income attributable to DowDuPont Inc. (adjusted) hidden hidden hidden hidden hidden

DowDuPont Inc.'s inventory value on Dec 31, 2017 would be $16,776  (in millions) if the FIFO inventory method was used instead of LIFO. DowDuPont Inc.'s inventories, valued on a LIFO basis, on Dec 31, 2017 were $16,992 . DowDuPont Inc.'s inventories would have been $(216) higher than reported on Dec 31, 2017 if the FIFO method had been used instead.


Adjusted Ratios: LIFO vs. FIFO (Summary)

DowDuPont Inc., 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. DowDuPont Inc.'s adjusted current ratio deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. DowDuPont Inc.'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. DowDuPont Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and 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.
DowDuPont Inc.'s adjusted financial leverage increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. DowDuPont Inc.'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. DowDuPont Inc.'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 millions) hidden hidden hidden hidden hidden
Current liabilities (USD $ in millions) hidden hidden hidden hidden hidden
Current ratio1 hidden hidden hidden hidden hidden
Adjusted: from LIFO to FIFO
Adjusted current assets (USD $ in millions) hidden hidden hidden hidden hidden
Current liabilities (USD $ in millions) 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. DowDuPont Inc.'s adjusted current ratio deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

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 income attributable to DowDuPont Inc. (USD $ in millions) hidden hidden hidden hidden hidden
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Net profit margin1 hidden% hidden% hidden% hidden% hidden%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to DowDuPont Inc. (USD $ in millions) hidden hidden hidden hidden hidden
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted net profit margin2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 Net profit margin = 100 × Net income attributable to DowDuPont Inc. ÷ Net sales
= 100 × hidden ÷ hidden = hidden%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to DowDuPont Inc. ÷ Net 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. DowDuPont Inc.'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
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
Total asset turnover1 hidden hidden hidden hidden hidden
Adjusted: from LIFO to FIFO
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total asset turnover2 hidden hidden hidden hidden hidden

2017 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Net 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. DowDuPont Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and 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 millions) hidden hidden hidden hidden hidden
DowDuPont's stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted: from LIFO to FIFO
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted dowDuPont's stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted financial leverage2 hidden hidden hidden hidden hidden

2017 Calculations

1 Financial leverage = Total assets ÷ DowDuPont's stockholders' equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted dowDuPont's 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.
DowDuPont Inc.'s adjusted financial leverage increased from 2015 to 2016 but then declined significantly 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 income attributable to DowDuPont Inc. (USD $ in millions) hidden hidden hidden hidden hidden
DowDuPont's stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
ROE1 hidden% hidden% hidden% hidden% hidden%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to DowDuPont Inc. (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted dowDuPont's stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROE2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROE = 100 × Net income attributable to DowDuPont Inc. ÷ DowDuPont's stockholders' equity
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROE = 100 × Adjusted net income attributable to DowDuPont Inc. ÷ Adjusted dowDuPont's 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. DowDuPont Inc.'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 income attributable to DowDuPont Inc. (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
ROA1 hidden% hidden% hidden% hidden% hidden%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to DowDuPont Inc. (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROA2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROA = 100 × Net income attributable to DowDuPont Inc. ÷ Total assets
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROA = 100 × Adjusted net income attributable to DowDuPont Inc. ÷ 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. DowDuPont Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.