the efficiency or effectiveness of a company’s management. Examples of Turnover Ratios Some of the turnover ratios are: accounts receivable turnover ratio inventory turnover ratio total assets turnover ratio fixed...
the efficiency or effectiveness of a company’s management. Examples of Turnover Ratios Some of the turnover ratios are: accounts receivable turnover ratio inventory turnover ratio total assets turnover ratio fixed...
What causes a variation in profit margin and turnover ratios between industries? Mega grocery stores, discount stores, and warehouse clubs often have small profit margins but have high turnover ratios. The small profit...
A ratio consisting of an income statement account balance divided by the average balance of a balance sheet account. For example, the inventory turnover is computed as follows: Cost of Goods Sold divided by the average...
The mathematical result of sales revenues divided by average total assets during the period of the sales.
This ratio relates the costs in inventory to the cost of the goods sold. To learn more about this ratio, see Explanation of Financial Ratios.
Which financial ratios are considered to be efficiency ratios? I consider the efficiency ratios to be the ratios also known as asset turnover ratios, activity ratios, or asset management ratios. These efficiency ratios...
The financial ratio which indicates the speed at which a company collects its accounts receivable. If a company’s turnover is 10, this means the company’s accounts receivable are turning over 10 times per...
What is the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is an important financial ratio that indicates a company’s past ability to sell its goods. Converting inventory...
of working capital during the year was $400,000. Therefore, its working capital turnover ratio was: net sales of $2,400,000 divided by average working capital of $400,000 = 6 times during the year. As with most...
What is the total asset turnover ratio? Definition of Total Asset Turnover Ratio The total asset turnover ratio indicates the relationship between a company’s net sales for a specified year to the average amount of...
turned over 10 times during the year, or approximately every 36 days (360 or 365 days per year divided by the turnover of 10). Whether the accounts receivable turnover ratio of 10 is good or bad depends on the...
Why not use Sales in the Inventory Turnover Ratio? The short answer is: Because Inventory is at cost. Inventory is not on the company’s books at selling prices. The Inventory Turnover Ratio is Cost of Goods Sold...
What is a limitation of the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is often calculated by dividing a company’s cost of goods sold for a recent year by the average...
What is the fixed asset turnover ratio? Definition of Fixed Asset Turnover Ratio The fixed asset turnover ratio shows the relationship between a company’s annual net sales and the net amount of its fixed assets. The...
Why are average balance sheet amounts used in calculating the turnover ratios? In the calculation of a turnover ratio, the numerator is an amount from an annual income statement, while the denominator is a balance sheet...
of accounting, turnover is used to express the rate at which a company has to replace the employees who leave the company. Examples of Turnover in Financial Ratios The following are a few of the most common financial...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
is the __________-test ratio. 6. The numerator in the calculation of the receivable turnover ratio is the net credit __________ for the year. 7. The inventory turnover ratio is best computed with the numerator being the...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
. Using the information in our previous calculation, the receivables turnover ratio was 8. Therefore, the average collection period was 45 days [360 days/8]. A logical next step is to compare the average collection...
__________ __________ __________ time. Select... an interval of a moment in 9. The accounts receivable turnover ratio is best calculated using net __________ sales. Select... cash credit cash and credit 10. The payment...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
, the inventory turnover ratio divides a company’s cost of goods sold for a recent year by the company’s average inventory during that year. Perhaps the most frequently used accounting ratio is the current ratio,...
Financial ratios such as current ratio, quick ratio, receivables turnover ratio, and inventory turnover ratio. To learn more, see Explanation of Financial Ratios
In some countries turnover refers to sales. Turnover is also associated with some financial ratios such as the inventory turnover ratio, the accounts receivable turnover ratio, and asset turnover ratio.
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
What is a liquidity ratio? Definition of Liquidity Ratio A liquidity ratio is a financial ratio that indicates whether a company’s current assets will be sufficient to meet the company’s obligations when they become...
Why doesn't AccountingCoach.com classify the financial ratios? We avoided classifying the financial ratios because a financial ratio may overlap several classifications, and there are several different titles for...
to as liquidity ratios or short-term solvency ratios since they assist in evaluating a company’s ability to pay its current obligations: Working capital Current ratio Quick ratio Accounts receivable turnover ratio...
sales will fluctuate as well. Therefore, you should view this as an average from the past. The calculation of the days’ sales in inventory is: the number of days in a year (365 or 360 days) divided by the inventory...
of capital than if it had $100 million of common stock outstanding. Select... True False 4. A company’s inventory turnover ratio for the prior year was 9 times. This means that its inventory during the past year had...
is the sum of the following: the days’ sales in inventory (365 days/inventory turnover ratio), plus the average collection period (365 days/accounts receivable turnover ratio) The operating cycle has...
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