 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
the company's receivables and how efficiently it uses
its other assets.
business to turn its accounts receivable into cash. Should be
considered in conjunction with the terms of sale that a company
or industry typically allows.
Accounts Receivable x 365 = Collection Period in Days
Sales
inventory. If the ratio is very high, it may indicate that
the business is losing sales to competitors because they
are understocked or customers are buying elsewhere. If
the ratio is too low, this may show that the inventories
are stagnant.
Annual Net Sales
Inventory
in assets that is needed to generate the annual sales
level. If the percentage is very high, it probably
indicates that a business is not being aggressive in its
sales efforts. If the ratio is low, it usually means that the
business is putting a strain on its existing assets.
Total Assets
Net Sales
times working capital turns over annually in relation to
net sales. A high turnover rate can indicate an
excessive sales volume in relation to the investment in
the business. A high turnover rate might also indicate
that the business relies extensively upon credit granted
by suppliers or banks as a substitute for an adequate
margin of operating funds.
Net Sales
Net Working Capital
company pays its suppliers in relation to the sales
volume being transacted. A low percentage would
indicate a healthy ratio with all bills be paid in a timely
manner.
Accounts Payable
Sales
