Financial Efficiency Ratios Flashcards
1
Q
What do financial efficiency ratios tell us
A
Tells us how effectively a business is managing its assets
2
Q
What 4 efficiency ratios are there
A
1) Assets turnover
2) Stock turnover
3) Receivable days
4) Payable days
3
Q
Equation for assets turnover
A
Revenue/Assets
4
Q
The higher asset turnover the….
A
Better
5
Q
When are comparisons of assets turnover meaningful
A
When they are made for different companies within the same sector
6
Q
Stock turnover equation
A
Stock turnover = Cost of sales / average stock held
7
Q
What does a stock turnover of 7 mean
A
Means you go through your warehouse stock 7 times a year
