P2A2.3 Activity Ratios

Question 1

Days Sales Outstanding

Answer 1

365
÷
ARTO

OR

365 x avg AR
÷
Credit sales

Question 2

Days Sales Inventory

Answer 2

365
÷
ITO

Or

365 * avg inventory
÷
COGS

Question 3

Days Sales Payables

Answer 3

Credit Purchases
÷
Avg AP

Question 4

Operating Cycle

Answer 4

DSO + DSI

Question 5

Cash Cycle

Answer 5

DSO + DSI - DPAP

Question 6

Total Asset Turnover (TAT)

Answer 6

Sales
÷
Avg total assets

Measures how well firm uses assets to generate sale (ideally min assets to make Max sales)

Question 7

Fixed Asset Turnover

Answer 7

Sales
÷
Total Plant, Property & Equipment

Question 8

Will Uncollectibles affect ARTO?

Answer 8

No because they are not included in the net AR