Efficiency Ratios Flashcards
How is collection days calculated?
Trade receivables / revenue x 365
How is payables days calculated?
Trade payables / COS (or purchases) x 365
How is inventory turnover or inventories days calculated?
Inventories value / average daily cost of sales in period
How is inventories weeks calculated?
Total inventories value/average weekly cost of sales (COS/52)
How is operating cycle days calculated?
Inventories days + Receivables days - Payables days
How is operating cycle margin calculated?
Working capital requirement/Revenue x 100
How is working capital requirement calculated?
Inventories + Receivables - Payables
How is asset turnover calculated and what does it show? (times)
Revenue/ Total assets, shows value of company’s sales relative to the value of its assets
How is cost of sales calculated?
Opening inventory + purchases - closing inventory
