EFFICIENCY RATIOS
Cash Turnover
Measures how effective a company is utilizing its cash.
Formula Net Sales
Cash
Sales to Working Capital (Net Working Capital Turnover)
Formula Net Sales
Average Working Capital
Total Asset Turnover
Formula Net Sales
Average Total Assets
Fixed Assets Turnover
Measures the capacity utilization and the quality of fixed assets.
Formula Net Sales
Net Fixed Assets
Day's Sales in Receivables
Formula Gross Receivables
Annual Net Sales/365
Accounts Receivable Turnover
Indicates the liquidity of the company's receivables.
Formula Net Sales
Average Gross Receivables
Accounts Receivable Turnover in Days
Indicates the liquidity of the company's receivable in days.
Formula Average Gross Receivables
Annual Net Sales/365
Inventory Turnover
Indicates the liquidity of the inventory.
Formula Cost of Goods Sold
Average Inventory
Inventory Turnover in Days
Indicates the liquidity of the inventory in days.
Formula Average Inventory
Cost of Goods Sold / 365
Operating Cycle
Formula Accounts Receivable turnover in Days + Inventory Turnover in Day
Days Payables Outstanding
Indicates how the firm handles obligations of its suppliers.
Formula Ending Accounts Payable
Purchases / 365
Payables Turnover
Indicates the liquidity of the firm's payables.
Formula Purchases
Average Accounts
Payables Turnover in Days
Indicates the liquidity of the firm's Payables in days.
Formula Average Accounts Payable
Purchases / 365
SYNOPSIS OF FINANCIAL ANALYSIS
FINANCIAL STATEMENTS / FINANCIAL REPORTS
USERS OF FINANCIAL STATEMENTS
TYPES OF FINANCIAL ANALYSIS
TOOLS OF FINANCIAL ANALYSIS (METHODS)
RATIO ANALYSIS
CLASSIFICATION OF RATIOS
LIQUIDITY RATIOS
PROFITABILITY RATIOS
LEVERAGE RATIO
EFFICIENCY RATIO
MBA NOTES
Cash Turnover
Measures how effective a company is utilizing its cash.
Formula Net Sales
Cash
Sales to Working Capital (Net Working Capital Turnover)
Indicates the turnover in working capital per year. A low ratio indicates inefficiency, while a high level implies that the company's working capital is working too hard.
Average Working Capital
Total Asset Turnover
Measures the activity of the assets and the ability of the business to generate sales through the use of the assets.
Average Total Assets
Fixed Assets Turnover
Measures the capacity utilization and the quality of fixed assets.
Formula Net Sales
Net Fixed Assets
Day's Sales in Receivables
Indicates the average time in days, those receivables are outstanding (DSO). It helps determine if a change in receivables is due to a change in sales, or to another factor such as a change in selling terms. An analyst might compare the days sales in receivables with the company's credit terms as an indication of how efficiently the company manages its receivables.
Annual Net Sales/365
Accounts Receivable Turnover
Indicates the liquidity of the company's receivables.
Formula Net Sales
Average Gross Receivables
Accounts Receivable Turnover in Days
Indicates the liquidity of the company's receivable in days.
Formula Average Gross Receivables
Annual Net Sales/365
Inventory Turnover
Indicates the liquidity of the inventory.
Formula Cost of Goods Sold
Average Inventory
Inventory Turnover in Days
Indicates the liquidity of the inventory in days.
Formula Average Inventory
Cost of Goods Sold / 365
Operating Cycle
Indicates the time between the acquisition of inventory and the realization of cash from sales of inventory. For most companies the operating cycle is less than one year, but in some industries it is longer.
Days Payables Outstanding
Indicates how the firm handles obligations of its suppliers.
Formula Ending Accounts Payable
Purchases / 365
Payables Turnover
Indicates the liquidity of the firm's payables.
Formula Purchases
Average Accounts
Payables Turnover in Days
Indicates the liquidity of the firm's Payables in days.
Formula Average Accounts Payable
Purchases / 365
SYNOPSIS OF FINANCIAL ANALYSIS
FINANCIAL STATEMENTS / FINANCIAL REPORTS
USERS OF FINANCIAL STATEMENTS
TYPES OF FINANCIAL ANALYSIS
TOOLS OF FINANCIAL ANALYSIS (METHODS)
RATIO ANALYSIS
CLASSIFICATION OF RATIOS
LIQUIDITY RATIOS
PROFITABILITY RATIOS
LEVERAGE RATIO
EFFICIENCY RATIO
MBA NOTES