Efficiency Flashcards
What are Activity Ratios also known as?
Turnover ratios
What do Turnover Ratios measure?
the ability of the company to convert different accounts in the balance sheet into cash or revenues
Asset Turnover?
sales / average total assets
What is the general rule for Asset Turnover?
the higher the better
What is Asset Turnover?
how quickly total assets are being sold
Inventory Turnover
COGS / average inventory
What is the general rule for Inventory Turnover?
the higher the better
What is Inventory Turnover?
how quickly inventory is being sold
Adjusting Inventory Turnover
LIFO COGS / average FIFO inventory
What is Adjusting Inventory Ratios?
adjusting LIFO to FIFO to make companies comparable
How do you convert LIFO inventory to FIFO?
LIFO Inventory + LIFO reserve
Accounts Receivable Turnover
sales revenue / average accounts receivable
What is the general rule for Accounts Receivable Turnover?
the higher the better
What is Accounts Receivable Turnover?
a company’s ability to sell and collect credit
