Turnover (efficiency) Ratios

Question 1

What are the formulas for Total Asset Turnover and Fixed Asset Turnover?

Answer 1

Total Asset Turnover =

Net Sales    ------------------
Total Assets

Fixed Asset Turnover=

  Net Sales ------------------------- Total Fixed Assets

Question 2

What do Total Asset Turnover and Fixed Asset Turnover mean?

Answer 2

indicates how well the business is using its assets (total or Fixed) to generate sales

Question 3

What are the formulas for A/R Turnover and A/R Turnover Days?

Answer 3

A/R Turnover:

      Net Sales ------------------------------ Accounts Receivables

A/R Turnover Days:

          365 -----------------------------
  A/R Turnover

Question 4

What do A/R Turnover and A/R Turnover Days mean?

Answer 4

Efficiency with which a firm collects credits issued to customers

and how many days it takes them to collect

Question 5

What are the Formulas for Inventory Turnover and Inventory Turnover Days?

Answer 5

Inventory Turnover:

COGS ------------------  Inventories 

Inventory Turnover Days:

         365 ---------------------------- Inventory Turnover

Question 6

What do Inventory Turnover and Inventory Turnover Days Mean?

Answer 6

How many times a firm has sold and replaced its inventories

and how many days it takes to do so

Question 7

What are the Formulas for A/P Turnover and A/P Turnover Days?

Answer 7

A/P Turnover:

Accounts Payable

A/P Turnover Days:

        365 ----------------------------
  A/P Turnover

Question 8

What do A/P Turnover and A/P Turnover Days mean?

Answer 8

The Rate at which a firm pays back its debt.

The number of days that it takes a company, on average, to pay creditors