CH13 Financial indicators

Question 1

Inventory turnover

Answer 1

Measures the average number of days it takes for inventory to convert to sales.

Avg. inventory/Cost of goods sold

Question 2

Accounts payable turnover

Answer 2

Measures the average number of days it takes the business to pay its credit suppliers.

Avg. accounts payable/Credit purchases

Question 3

Accounts receivable turnover

Answer 3

Measures the average number of days it takes its credit customers to repay owing amounts.

Avg. Accounts receivable/Credit sales

Question 4

Cash flow cover

Answer 4

Measures how many times the net cash flows from operating activities covers the average current liabilities. Meet short term debts.

Net cash flow from operations/average current liabilities