Efficiency Flashcards
Inventory Turnover
Cost of Goods sold/Stock (per year)
Shows how many times the business will sell all of their stock
Different businesses will have a different turnover rate, the higher the turnover rate the better
OR
inventory/ cost of sales x365
Receivables Days
Receivables/Sales Revenue x 365 (days)
Shows how long a business takes to collect its debts from their customers who paid on credit.
The shorter the amount of time the better as it affects cash flow
Payables Days
Payables/Cost of Goods x 365
Shows how long a business takes to pay its debts
the longer it is, the better because it affects cash flow.
Capacity Utilisation
Actual output / units of output x 100
Businesses will aim to have a capacity utilisation of 98/99%
Total contribution
Contribution per unit x units sold
Contribution per unit
Selling price - variable cost per unit
Breakeven output
Fixed costs / contribution per unit
Margin of safety
Actual output - breakeven output
Debts as a proportion of long term funding
Debts / capital employed
Capital employed
Total equity + Non current liabilities
Unit cost
Total cost/total output
Current ratio
Current assets/ current liabilities
Gearing
Non current liabilities / capital employed x100
Payback
Number of full years + (amount of investment not recovered /revenue generated the next year)
Average annual return
Total net profit from project / number of years of project
