3.6 Ratio Efficiency Ratio Analysis Flashcards
1
Q
Debtor Days
A
- Average time it takes to collect money from debtors
- (Debtors/Revenue) x 365
2
Q
Debtors
A
The people that owe the money
3
Q
Debtors
A
The people that owe the money
4
Q
Creditor Days
A
- Average time it takes to pay suppliers
- (Creditors/Cost of Goods Sold) x 365
5
Q
Creditors
A
People/Company that lend you the money
6
Q
Stock (Inventory) Turnover
A
Formula 1
* How many times stock is bought in per year
* (Cost of Goods Sold/Stock)
Formula 2
* How many days does it take for stock to be sold
* (Stock/Cost of Goods sold) x 365
7
Q
Gearing Ratio
A
- How much debt the company has
- How reliant the business is on Long Term Liabilities
Gearing Ratio = (Long Term Liabilities/Capital Employed) x 100
Capital Employed = Long Term Liabilities + Share Capital + Accumulated Retained Profit
Higher Value =
* Relatively higher debt levels
* Higher interest payments
* Higher risk
