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5 Cards in this Set
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Efficiency ratios |
These ratios assess the utilization of a firm's resources in term of its assets and liabilities in this section further efficiency ratios will be explored, namely, stock turnover, debtor, days, creditor days and gearing ratio. |
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Stock turnover ratio |
This ratio measure how quick a firm's stock is sold and replaced over a given period. It considers the number of times stock is sold and replenished. There are two approaches Stock turnover ratio (number of times) = costs of goods sold /and average stockStock turnover ratio (number of days) = average stock/cost of goods sold x 365 |
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Debtor days |
This ratio measure the number of days it takes on average for a firm to collect its debt from customers it has sold goods to on credit. These customers who owe the business money are known as debtors and the ratio is also referred to as the debt collector period Debtor days ratio (number of days) = debtors /total sales revenue x 265 |
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Creditor days |
The ratio measures the average number of days a firm takes to pay its creditors it assess how quickly usually within a year, a firm is able to pay its suppliers for example: Creditor days, ratio (number of days) = creditor's / costs of goods sold x 365 |
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Gearing ratio |
This measures the extent to which the capital employed by a firm is financed from loan capital.Gearing ratio = loan capital / capital employed x 100 |
