FAR 1F - Financial Ratios - Activity

Question 1

A/R Turnover Ratio

Answer 1

Credit Sales / Average Gross A/R

(# times average A/R was collected)

Question 2

Inventory Turnover

Answer 2

COGS/Average Inventory

COGS = Beginning Inv + Purchases - Ending Inv

(# times average Inventory was sold)

Question 3

A/P Turnover Ratio

Answer 3

Credit Purchases / Average A/P

(# times average A/P was paid)

Question 4

Days Sales Outstanding

Answer 4

365 / A/R Turnover

OR

Average A/R / (Credit Sales / 365)

Question 5

Days Sales in Inventory

Answer 5

365 / Inventory Turnover

OR

Average Inv / (Cost of Sales / 365)

(# days before Inv is sold)

Question 6

Days Purchases in A/P

Answer 6

365 / A/P Turnover

OR

Average Payables / (Credit Purchases / 365)

(# days before a credit purchase is paid)

Question 7

Operating Cycle

Answer 7

Days Sales Outstanding + Days Sales in Inventory

(# days from purchase/production of inventory until cash is collected from A/R)

Question 8

Cash Cycle

Answer 8

Days Sales Outstanding + Days Sales in Inventory - Days Purchases in A/P

OR

Operating Cycle - Days Purchases in A/P

Days Sales in Inventory = Days Inventory Outstanding
Days Purchases in A/P = Days Payables Outstanding

Question 9

Total Assets Turnover

Answer 9

Sales / Average Total Assets

Question 10

Fixed Assets Turnover

Answer 10

Sales / Average net PP&E