Efficiency ratio analysis Definitions

Question 1

Efficiency ratio

Answer 1

a financial ratio that shows how well a business is managing its operations in relation to the working capital cycle

Question 2

Stock turnover ratio

Answer 2

a measure of the number of times, on average, that a company sells and replenishes its stock
OR
the rate at which a manufacturing business uses its stock of resources in a given time period

Question 3

Debtor days ratio

Answer 3

a measure of the number of days that it takes for a business to collect its debts

Question 4

Creditor days ratio

Answer 4

a measure of the avergae number of days it takes for a business to pay its debts

Question 5

Gearing ratio

Answer 5

a measure of how much of a business’s capital employed is financed by long-term debt