ways they are DTR and AverageCollectionPeriod.
It indicates the number time debtors turned over each year. Generally the higher value of debtor’s turnover shows high efficiency to manage the credit management.
) between sales and collection thereof. MathurS B (2002) suggested that these ratios could be calculated by the following formulae.
(Source Wikipedia, the free encyclopedia/Weygandt, J. J., Kieso, D. E., & Kell, W. G. (1996...
TURNOVER, AVERAGECOLLECTIONPERIOD, AVERAGE PAYMENT PERIOD and TOTAL ASSET TURNOVER.
3. DEBT RATIO
A ratio that indicates what proportion of debt a company has relative to its assets. The measure gives an idea to the leverage of the company along with the potential risks the...
FINANCIAL ANALYSIS OF DELL AND HP 9
Dell’s accountsreceivable rate of growth was 11.90% on average, growing faster than the
company’s average sales rate, 1.86%. This relates to the increase in the collectionperiod in days
also increasing over this five year span.
The category of property...
order t know the rate at which cash is generated by turnover of receivables, the debtors turnoverratio is supplemented by another ratio viz., averagecollectionperiod. The averagecollectionperiod states unambiguously the number of days’ average credit sales tied up in the amount owed by the buyers...
current ratio at the balance sheet data than the average or normal current ratio during the rest of the year.
For Example: near the end of an accounting period a firm might delay normal purchases on an account or might collect receivables for loans to officers, classified as non current...
TurnoverRatio Current Ratio Quick Ratio Cash and Bank to Current Liabilities Receivable Index AverageCollectionPeriod Inventories Index Components of Inventories
Chart No 3-1 3-2 3-3 3-4 3-5 3-6 3-7 4-1 4-2 6-1 6-2 6-3 6-4 6-5 6-6 6-7 7-1 7-2 7-3 7-4 7-5 7-6 7-7 8-1 8-2 8-3 8-4
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future financing needs easily.
6.16 (a) and (b) Short-term liquidity Current ratio Quick ratio Cash flow liquidity ratio* Averagecollectionperiod Days inventory held Days payable outstanding Cash conversion cycle Operating efficiency Accountsreceivableturnover Inventory turnover...
this ratio is low, it means that the liquidity
of the receivables of the company is low. On the other hand, a high value indicates that the
company has high liquidity of its receivables.
- Hussain Mills Limited: AccountsReceivableTurnover of Hussain Mills Limited has
shown a decreasing trend...
averagecollectionperiod indicates an aggressive collection of accountsreceivable which reflects good collection policies.
3. The ratio measuring turnover of fixed assets indicates how rapidly sales revenues are being generated as a result of using up the firm’s plant and equipment ( net fixed...
amount to blocking of the Firms funds thus time interval between the date of sales and the date of payment has to be financed out of working capital.
A Firms investment in accountreceivable depends on
1. The volume of credit sales
Therefore average investment...
c. Proprietary Ratio
Prepared by Fred M’mbololo
d. Fixed Assets to Proprietor’s Fund Ratio
e. Capital Gearing Ratio
f. Interest Coverage Ratio
C. Activity Ratio or TurnoverRatio
a. Stock TurnoverRatio
b. Debtors or ReceivablesTurnoverRatio
iv) Creditors TurnoverRatio
v) Average Payment periodRatio
vi) Working capital TurnoverRatio
vii) Current Assets TurnoverRatio
viii) Net Assets TurnoverRatio
i) Inventory TurnoverRatio:
The inventory turnoverratio...
measures what happened during a period whereas the balance sheet shows the condition only at the end of the period, average balance sheet data are normally used for consistency.
= flow/ receivables = snapshot – can be problematic
o Receivablesturnover – stable
o Inventory turnover – stable¨
o Asset turnover – very important ratio – is decreasing, consistently over the period => can be due to lower sales or higher assets
New investments generate lower and lower sales...
receivables. The turnover of receivables indicates the rate at which sales are converted into cash and the average conversion period shows the number of days of sales that are represented by the accountreceivables. A declining turnover of accountreceivables indicates an over investment of funds in...