Efficiency Ratios

Efficiency or Activity or Turnover Ratios


Efficiency Ratios: How efficiently the Operations of the Company?
<div class="WordSection1">
 Measures how efficiently assets have been used. 
black;">Efficiency saves on the fund needed to be invested.
black;">Evaluates the speed with which certain accounts are converted into sales or
cash.
middle; margin: 4pt 0 .0001pt 23.2pt;">Efficiency (or Turnover) Ratios [Short term]
middle; margin: 0 0 .0001pt 23.2pt;"> Account Receivables: "Account
Receivables are Necessary Evil"
Symbol; color: #0070c0;"> Receivables (or Debtors) Turnover
Calibri; color: #0070c0;">Number of Days Sales in receivables
(DSO)
Calibri; color: #0070c0;">Current Assets Turnover Ratio
Calibri; color: #0070c0;">Inventory Turnover & Inventory Turnover in
Days
Calibri; color: #0070c0;">Account Payables or Days in Account Payables
(DPO)

middle; margin: 0 0 .0001pt 23.2pt;">Efficiency (or Turnover) Ratios [Long
term]
Calibri; color: #0070c0;">Fixed Assets Turnover Ratio
Calibri; color: #0070c0;">Total Assets Turnover Ratio


Calibri; color: #0070c0;">Receivables turnover: Investors and managers keep a watchful
eye on the relationship among sales, accounts receivable, and cash<img class="alignnone wp-image1147" src="https://sanits591.files.wordpress.com/2015/07/c5214account2breceivables.jpg" alt="Internal Users" width="216" height="177"
align="right" /> collections. If sales
increase,
then accounts receivable are also expected to increase.
Other Measures of Activity or
Efficiency Ratios
<ul style="margin-left: .375in; direction: ltr; unicode-bidi: embed; margin-top: 0in;
margin-bottom: 0in;" type="disc">
<li style="margin-top: 0; margin-bottom: 0; vertical-align: middle; color:
#0070c0;">Margin Vs Turnover</li>
#0070c0;">Sales Revenue (or Net Sales) to Capital Employed</li>
#0070c0;">Sales Revenue per Employee -> Now-a-days an
effective tool for management</li>
</ul>
 __________________________________________
Calibri; color: red;">But a disproportionate increase in accounts
receivable might signal
Calibri; color: red;">trouble. Perhaps the company increased its sales by loosening its credit
middle; margin: 0 0 .0001pt 23.2pt;">policy, and these receivables may be difficult or impossible to collect. Such
receivables are considered
less liquid.
Measures the relative size of accounts receivable and the effectiveness
of credit policies.
This ratio
measures the number of times, on average, a company collects receivables during
the period. The ratio is computed
by dividing net sales by average (net) receivables outstanding during the year.
Theoretically, the numerator should include only net credit sales, but
this information is frequently unavailable. However, if the relative amounts of credit
and cash sales remain fairly constant, the trend indicated by the ratio will still be
valid. Barring significant seasonal factors, average receivables outstanding
can be computed from the beginning and ending balances of net trade
receivables.
Accounts Receivable
Turnover: We can
measure how frequently a company converts its receivables into cash
by computing the accounts
receivable turnover. This ratio measures the number of times, on average, a
company collects the receivables during the period & is defined as
<a
href="https://sanits591.files.wordpress.com/2015/07/ad711-receivables.jpg"><img
class="alignnone wp-image-1147"
src="https://sanits591.files.wordpress.com/2015/07/ad711-receivables.jpg?w=300"
alt="Internal Users" width="450" height="50" /></a>

The general rule is that the average collection period should not greatly exceed the
credit term period. That is, if
customers are given a 60-day period for payment, then the average collection
period should not be too much in excess of 60 days.
Account

Receivables are Necessary Evil: Accounts receivable turnover is high when accounts receivable are quickly
collected. A high turnover is favorable because it means the company need not
commit large amounts of funds to accounts receivable. However, an accounts
receivable turnover can he too high: this can occur when credit terms are so
restrictive that they negatively affect sales volume.
Point: Ending accounts receivable can be
substituted for the average balance in computing accounts receivable
turnover if the
difference between ending and average receivables is small.


#0070c0;">Days Sales Outstanding (DSO) or Average Collection
Period : This ratio is the average time a company has to wait to
receive its cash after making a sale. It measures how effective the companys
credit, billing, and collection procedures are.
DSO: Right there, of course, is an avenue for rapid
improvement in a companys cash position.

 Why is it taking so long?


Are customers
unhappy because of product defects or poor service?
Are salespeople
too lax in negotiating terms?
Are the receivables
clerks demoralized or inefficient?
Is everybody
laboring with outdated financial management software?
</div>
DSO does tend to vary a good deal by industry,
region, economy, and seasonality, but still: if this company could get the ratio down to forty-five or even forty days, it would improve its cash position considerably. This is a prime
example of a significant phenomenon;
namely, that careful management can
improve a businesss financial picture even with no
change in its revenues or costs.
DSO is also

a key ratio for the folks who are doing due diligence on a potential
acquisition. A high DSO may be a red flag in that it suggests that customers arent
paying their bills in a timely fashion, :

style="font-family: Calibri;">Maybe the customers themselves are in financial
trouble.

style="font-family: Calibri;">Maybe the target companys operations and financial
management are poor.

style="font-family: Calibri;">Maybe there is some fast-and-loose financial artistry
going on.
Note only that it is by definition a weighted

average. So its important that the
due diligence folks look at the aging of receivablesthat is, how old specific
invoices are and how many there are. It may be that a couple of unusually large and
unusually late invoices are skewing the DSO number. It is defined as follows:
DSO=(Accounts Receivable)/(Total Revenues/360)

The use of 360 is the standard number of days

for most financial analysis.
Days sales

in receivables tell us how many days sales remain in Accounts
receivable.
The shorter the

average collection period, the lower the firms investment in receivables, and the
lower the working capital requirement.
Although this ratio can be useful, it is important

to remember that it produces an average figure for the number of days for
which debts are outstanding. This average may be badly distorted by, for example, a
few large customers who are very slow or very fast payers.
The reduction in

these days should be questioned if the reduction were achieved at
the expense of customer goodwill or a high direct financial
cost. For example, the reduction may have been due to chasing
customers too vigorously or as a result of incurring higher expenses, such as
discounts allowed to customers who pay quickly.
A rough

guideline states that days sales uncollected (DSO) should not exceed 1.33 times the
days in its:

style="font-size: 12pt; font-family: Calibri;">Credit period, if discounts are not
offered or

style="font-size: 12pt; font-family: Calibri;">Discount period, if favorable discounts
are offered.
<a href="https://sanits591.files.wordpress.com/2015/07/eee76receivables2bturnover2bexample.jpg"><img class="alignnone wp-image-1147"

src="https://sanits591.files.wordpress.com/2015/07/eee76receivables2bturnover2bexample.jpg?w=300" alt="Internal Users" width="450"
height="350" /></a>
What this means is that

McKesson turned its receivables into cash more slowly than most of its competitors.
Therefore, it was less likely to pay its current obligations than a company with a
quicker receivables turnover and is more likely to need outside financing to meet
cash shortfalls.
In some cases:

Receivables turnover may be misleading.
 Some large retail chains that issue their own credit cards
encourage customers to use these cards for purchases. If customers pay slowly, the stores earn a
healthy return on the outstanding
receivables in the form of interest at rates of 18% to 22%.

 On the other hand, companies that sell (factor) their
receivables on a consistent basis will have a faster turnover than those that do not. Thus,
to interpret receivables turnover, you must know how a company manages
its receivables.
In general, the faster the turnover the

greater the reliability of the current ratio for assessing liquidity.
Calibri;">___________________________________________________
Symbol;">

#0070c0;">Current Assets Turnover Ratio: It is the ratio of Net Sales to Average
Current Assets, used for measuring Short Term Efficiency or
Activity
</div>
middle; margin: 0 0 .0001pt 23.2pt;">
Current Assets Turnover Ratio = Net Sales / (Average Current Assets)
___________________________________________________


style="font-size: 12pt; font-family: Calibri; color: #0070c0;">Inventory Turnover:
& Inventory Days Turnover The inventory turnover ratio measures the number of times on average a
company sells the inventory during the period.
It indicates how
quickly a company sells its goods.
It measures the liquidity of the
inventory. To compute inventory turnover, divide the cost of
goods sold by the average inventory on
hand during the period. Barring
seasonal factors, analysts compute average inventory from beginning and
ending inventory
balances. If the company were a seasonal
company, this would be a good ratio because it would mean it turned its inventory over each
season, on
average.
Calibri; color: #0070c0;">Represents the number of times per period inventory is
turned over (i.e., sold).
middle; margin: 0 0 .0001pt 23.2pt;">Inventory Turnover Ratio = (Cost of Goods Sold) / (Average
Inventory)

black;">Measures relative size of inventory.

The
higher the inventory turnover, the lower the firms investment in inventories, and
the lower the working capital requirement. It indicates the company has minimal funds tied tip in
inventorythat it has a minimal amount of inventory on hand at any one time.
Although minimizing the funds tied tip in inventory is efficient, too high an inventory turnover ratio may
indicate that the company is losing sales opportunities because of inventory
shortages. For
example, investment analysts at one time suggested that Office Depot had gone too far in
reducing its inventorythey said they we are seeing too many empty shelves.

Thus, management should closely

monitor this ratio to achieve the best balance between too much and too little
inventory.
Cost of

goods sold is a better measure of turnover than sales because it is the cost of the
inventory items.

href="https://sanits591.files.wordpress.com/2015/07/79494inventory2bturnover.jpg"><img class="alignnone wp-image-1147"
src="https://sanits591.files.wordpress.com/2015/07/79494-inventory2bturnover.jpg?
w=300" alt="Internal Users" width="450" height="350" /></a>

Inventory Turnover Ratio (or Number of turns each year) varies widely for different
industries. For example, a
wholesaler of perishable fruits and vegetables may turn over inventory at least 50
times per year. An airplane manufacturer, however, may turn over its inventory
once or twice a year.
No. of Days in Sales Inventory = (No. of Days in a Period) / (Inventory
Turnover Ratio)
This measure can reveal a great deal

about inventory management. For example, an unusually low turnover (and, of
course, a high number of days in inventory) may signal a large amount of obsolete
inventory or problems in the sales department, Or it may indicate that the company
is pricing its products too high and the market is reacting by reducing demand for
the companys products. Changes in Product Mix will
dramatically affect the Inventory Ratios.
Excess Inventory increases

Insurance expenses, Property Taxes, Storage Costs and other related expenses. It
also causes the increasing risk of losses because of Price Declines, or obsolescence
of Inventories, which is also mentioned above.
href="https://sanits591.files.wordpress.com/2015/07/2aa6e-cogs.jpg"><img
src="https://sanits591.files.wordpress.com/2015/07/2aa6e-cogs.jpg?w=300"
Calibri;">___________________________________________________
Account

Payables or Days in Account Payables (DPO): The higher the DPO, the better a
companys cash position, but the less happy its
vendors are likely to be.


style="font-family: Calibri;">A company with a reputation for slow pay may find that
top-of-the-line vendors dont compete for its business quite so aggressively as they
otherwise might. 

style="font-family: Calibri;">Prices might be a little higher, terms a little
stiffer.

style="font-family: Calibri; color: #0070c0;">A company with a reputation for
prompt thirty-day payment will find the exact opposite.
Watching

DPO is a way of ensuring that the company is sticking to whatever balance it wants
to strike between preserving its cash and keeping vendors happy.
Accounts Payable turnover

ratio involves an increase in the accounts payable turnover ratio (a decrease in days payable) indicates that a firm pays its
obligations to suppliers more quickly, requiring cash and even wasting the benefits
of cash if the firm makes payments earlier than necessary.


On the other hand, a faster accounts payable turnover also means a smaller relative
amount of accounts payable that the firm must pay in the near future.
Most firms want to extend their payables as long as they can, but they also want to
maintain their relations with suppliers. Businesses, therefore, negotiate for
favorable payment terms and then delay paying until just before the last agreed
moment.
As trade payables provide a free source of

finance for the business, it is perhaps not surprising that some businesses attempt
to increase their average settlement period for trade payables.
</div>
<a href="https://sanits591.files.wordpress.com/2015/07/98659payables.jpg"><img class="alignnone wp-image-1147"
src="https://sanits591.files.wordpress.com/2015/07/98659-payables.jpg?w=300"
alt="Internal Users" width="450" height="150" /></a>
This is also called

Average Payment period. The longer the average payment period, the higher the firms
payables, and the lower the working capital requirement

Calibri;">___________________________________________________
Efficiency (or Turnover)

Ratios [Long term]
Calibri; color: #0070c0;">Fixed Assets Turnover Ratio: [Capital Intensity (PROPERTY, PLANT, AND EQUIPMENT TURNOVER; PPE
Turnover)]:
This
black;">ratio tells you how many dollars of sales your company gets for each dollar invested in property,
plant, and equipment (PPE).

black;">Its a measure of how efficient you are at generating revenue from
fixed assets such
as buildings, vehicles,
black;">and machinery. The calculation is simply total revenue (from the income statement)
divided by ending PPE (from the balance sheet):

</div>
middle; margin: 0 0 .0001pt 23.2pt;"><a
href="https://sanits591.files.wordpress.com/2015/07/45634-ppe.jpg"><img
src="https://sanits591.files.wordpress.com/2015/07/45634-ppe.jpg?w=300"
A company

that generates a lower PPE turnover, other things being equal, isnt using its assets as efficiently
as a company with a higher one.
So check the trend lines and the industry averages to see how your company stacks
up.
But please note that sneaky little qualifier,

other things being equal. The fact is, this is one ratio where the art of finance can affect the
numbers dramatically. 
___________________________________________________
How Leasing PPE affect the

PPE Turnover Ratio?
If a company leases much of its equipment

rather than owning it, for
instance, the leased assets may not show up on its
balance sheet. Its apparent asset base will be that much lower and PPE turnover
that much higher. Some companies pay bonuses
pegged to this ratio, which gives managers an incentive to lease equipment rather
than buy it. Leasing may or may not make strategic sense for any individual
enterprise. What doesnt make sense is
to have the decision made on the basis of a bonus payment.
Incidentally, a lease must meet specific requirements to qualify as an operating

lease (which may not show up on the balance sheet) as opposed to a
capital lease (which does). Always check these before analysing the
financial statement for any kind of lease.
___________________________________________________
Calibri; color: #0070c0;">Total Assets Turnover: This is the same idea as the previous ratio, but it compares Net
Sales (Net revenue) with total assets, not just
middle; margin: 0 0 .0001pt 23.2pt;">fixed
assets. (Total assets, remember,
includes cash, receivables, and inventory as well as PPE and other long-term
assets.)

middle; margin: 0 0 .0001pt 23.2pt;">The
formula and calculations:
</div>
href="https://sanits591.files.wordpress.com/2015/07/71ae4total2bassets.jpg"><img class="alignnone wp-image-1147"
src="https://sanits591.files.wordpress.com/2015/07/71ae4-total2bassets.jpg?
Total asset turnover gauges

not just efficiency in the use of fixed assets, but efficiency in the use of all
assets. 
Symbol; color: #0070c0;"> If you can reduce inventory, total asset turnover
rises. 
#0070c0;">If you can cut average receivables, total asset turnover

rises.
#0070c0;">If you can increase sales while holding assets constant (or increasing at
a slower rate), total asset turnover rises. 
Calibri;">Any of these managing-the-balance-sheet moves improves efficiency.
Watching the trends in total asset
Calibri;">turnover shows you how youre doing.
middle; margin: 0 0 .0001pt 23.2pt; font-size:
18pt;">___________________________________________________
middle; margin: 0 0 .0001pt 23.2pt; font-size: 14pt; color: navy;">Other
Measures of Activity or Efficiency Ratios
</div>
color: #0070c0;">Margin Vs Turnover: Profitability and efficiency
combine to determine a companys return on assets. Return on assets is
computed as net income divided by total assets and is the cents amount of net
income generated by each dollar of assets. The return on assets is impacted by both
the profitability of each dollar of sales and the efficiency of using assets to generate
sales. Return on assets for Colesville is computed as follows:</li>
</ul>
middle; margin: 0 0 .0001pt 23.2pt;"><a href="http://3.bp.blogspot.com/M2XBz59NrGs/Van5pEWlJGI/AAAAAAAAI3U/m-Bc8oP6SwE/s1600/Efficiency1.jpg"><img class="alignnone wp-image-1147" src="http://3.bp.blogspot.com/M2XBz59NrGs/Van5pEWlJGI/AAAAAAAAI3U/m-Bc8oP6SwE/s1600/Efficiency-1.jpg?
Even though profitability, as measured by return on sales, is approximately
the same in 2011 and 2010. the return on assets is higher in 2010 because in that
year Colesville was more efficient at using assets to generate sales.
13.0pt;">The degree to which assets are used to
generate sales is called turnover. 
middle; margin: 0 0 .0001pt 23.2pt;"><a href="http://4.bp.blogspot.com/NlGYLgnsY0g/Van5peS3trI/AAAAAAAAI3Y/G9vU2SYhIIk/s320/Efficiency-2.jpg"><img
class="alignnone wp-image-1147" src="http://4.bp.blogspot.com/NlGYLgnsY0g/Van5peS3trI/AAAAAAAAI3Y/G9vU2SYhIIk/s320/Efficiency-2.jpg?
11.0pt;">The nature of business is that some industries, such as the supermarket industry, are characterized by low margin but high
turnover. Other industries,
such as the jewelry store business, are characterized by high margin but low turn
over.
12.0pt;">The important point to remember is
that companies with a low margin can still earn an acceptable level of return on
assets if they have a high turnover.
middle; margin: 0 0 .0001pt 23.2pt;"><a href="http://1.bp.blogspot.com/_V9q1JzuVJE/Van5pnx3VSI/AAAAAAAAI3k/C7EJYFgG2DE/s320/Efficiency3.jpg"><img class="alignnone wp-image-1147" src="http://1.bp.blogspot.com/_V9q1JzuVJE/Van5pnx3VSI/AAAAAAAAI3k/C7EJYFgG2DE/s320/Efficiency-3.jpg?
Notice the wide variation in return on sales,
ranging from 2.1% for Safeway to 27.5% for Microsoft. Notice also that the variation in return on assets is
less. If you leave out Microsoft's
exceptional return on assets of 22.3%, the remaining return on assets numbers vary
only between 5.0% and 9.9%. 
The companies with a high return on
sales (Microsoft and McDonalds) have a low asset turnover, whereas those with a low return on sales (Home Depot, Safeway,
and Wal-Mart) have a high turnover.

Margin isnt everything, nor is
turnover everythingthe important thing is how they combine to generate return
on assets.
11.0pt;">_________________________________________________

color: #0070c0;">Sales Revenue (or Net Sales) to Capital Employed:
The sales
revenue to capital employed ratio (or net asset turnover ratio) examines
how effectively the assets of the business are being used to generate sales
revenue.
It is calculated as follows:</li>
</ul>
middle; margin: 0 0 .0001pt 23.2pt;"><a href="http://2.bp.blogspot.com/BRzKNnrRNMk/Van5p-3mHqI/AAAAAAAAI3c/gHS3gag30Zw/s320/Sales%2Brevenue
%2Bto%2Bcapital.jpg"><img class="alignnone wp-image-1147"
src="http://2.bp.blogspot.com/-BRzKNnrRNMk/Van5p3mHqI/AAAAAAAAI3c/gHS3gag30Zw/s320/Sales%2Brevenue%2Bto%2Bcapital.jpg?
<img
src="file:///C:\Users\admin\AppData\Local\Temp\msohtmlclip1\02\clip_image004.png
" alt="Machine generated alternative text: Sales Revenue Sales Revenue to Capital
Ratio = Share Capital + Reserves + Non Current Liabilities or Sales Revenue Sales
Revenue to Capital Ratio = Total Assets Current Liabilities Total Assets Current
Liabilities = Long term. Capital Employed" width="667" height="162" />
11.0pt;">Generally speaking, a higher net asset
turnover ratio is preferred to a lower one. A higher ratio will normally suggest that
assets are being used more productively in the generation of
revenue. However, a very
high ratio may suggest that the business is overtrading on its assets, that is, it has
insufficient assets to sustain the level of sales revenue achieved.
11.0pt;">When comparing this ratio for different businesses, factors such as the
age and condition of assets held, the valuation bases for assets and whether assets
are leased or owned outright can complicate interpretation.
11.0pt;">_________________________________________________

color: #0070c0;">Sales Revenue per Employee -> Now-a-days an
effective tool for management: The sales revenue per
employee ratio relates sales revenue generated to a particular business resource,
that is, labour. It provides a measure of the productivity of the work force. The ratio
is:



Sales Revenue per Employee=(Sales Revenue)/(Number of
Employees)

</li>
</ul>
11.0pt;">Generally, businesses would prefer to
have a high value for this ratio, implying that they are using their staff
efficiently.
A

metric which is worth considering with profitability in the numerator, which we shall
discuss it in the "Profitability Ratios".
Calibri; color:
#0070c0;">___________________________________________________
Calibri; color: #17365d;">Operating Cycle: The period of time (in days) during
which a firm converts cash into goods and services,
Calibri; color: #17365d;">then sells those goods and services
to customers, then collects cash from those customers is the firms
operating
Calibri; color: #17365d;">cycle.
</div>
href="https://sanits591.files.wordpress.com/2015/07/89504working2bcapital.jpg"><img class="alignnone wp-image-1147"
src="https://sanits591.files.wordpress.com/2015/07/89504-working2bcapital.jpg?
Calibri;">The cash-to-cash operating cycle is the length of time between the purchase of merchandise for sale,
assuming a retailer or wholesaler, and
the 
middle; margin: 0 0 .0001pt 23.2pt;">eventual
collection of the cash from the sale. One method to approximate the number of
days in a companys operating cycle
involves combining two measures:
href="https://sanits591.files.wordpress.com/2015/07/4ae24-ocycle.jpg"><img
src="https://sanits591.files.wordpress.com/2015/07/4ae24-ocycle.jpg?w=300"
Note

that although the length of the operating cycle may or may not change
significantly in years, but the composition may change: the increase in the
average number of days in inventory may get offset by the decrease in the average
number of days in receivables.

Sales

growth will require additional investments in the firms operating cycle
because:

The
firm will need more receivables, more inventories, and more payables to support its
additional sales.

black;">Working capital will grow at same rate as sales.
</div>
___________________________________________________
Hope you

have a good read!. We shall be discussing about Solvency ratios in the next
article.

Efficiency Ratios

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Efficiency Ratios

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<p style="margin: 0; font-family: Calibri; font-size: 18pt; color:

navy;"><strong>Efficiency or Activity or Turnover Ratios</strong></p>

Symbol; color: #0070c0;"> </span><b><span style="font-size: 12pt; font-family:

Symbol; color: #0070c0;"> </span><b><span style="font-size: 12pt; font-family:

Calibri; color: red;">trouble</span></b><span style="font-size: 12pt; font-family:

<b><span style="font-size: 13pt; font-family: Calibri; color: red;">Account

<b><span style="font-size: 12pt; font-family: Calibri;">Point: </span></b><span

<span style="font-size: 10pt; font-family: Symbol; color: #0070c0;">

<b><span style="font-family: Calibri; font-size: 11pt;">DSO</span></b><span

<span style="font-size: 10pt; font-family: Symbol;"> </span><b><span

</span></b><span style="font-size: 10pt; font-family: Symbol;">

<b><span style="font-size: 12pt; font-family: Calibri; color: #0070c0;">DSO is also

<span style="font-size: 10pt; font-family: Symbol;"> </span><b><span

<span style="font-size: 10pt; font-family: Symbol;"> </span><b><span

<span style="font-size: 10pt; font-family: Symbol;"> </span><b><span

<b><span style="font-family: Calibri;">Note only that it is by definition a weighted

<strong>DSO=(Accounts Receivable)/(Total Revenues/360)</strong>

<span style="font-family: Calibri;">The use of 360 is the standard number of days

<b><span style="font-size: 13pt; font-family: Calibri; color: #0070c0;">Days sales

<b><span style="font-size: 13pt; font-family: Calibri; color: black;">The shorter the

<span style="font-family: Calibri;">Although this ratio can be useful, it is important

<b><span style="font-size: 12pt; font-family: Calibri; color: red;">The reduction in

<b><span style="font-size: 13pt; font-family: Calibri; color: #0070c0;">A rough

<span style="font-size: 10pt; font-family: Symbol;"> </span><b><span

<span style="font-size: 10pt; font-family: Symbol;"> </span><b><span

<a href="https://sanits591.files.wordpress.com/2015/07/eee76receivables2bturnover2bexample.jpg"><img class="alignnone wp-image-1147"

<b><span style="font-size: 12pt; font-family: Calibri;">What this means is that

<b><u><span style="font-size: 13pt; font-family: Calibri;">In some cases:

<span style="font-family: Calibri;">In general, <b>the faster the turnover the

</span><b><span style="font-size: 12pt; font-family: Calibri; color:

<b><span style="font-size: 14pt; font-family:

<span style="font-size: 10pt; font-family: Symbol;"> </span><b><span

company, this would be a good ratio because it would mean it </b><span

<span style="font-size: 10pt; font-family: Symbol; color: black;">

<span style="font-family: Calibri; color: black;">Thus, management should closely

<b><span style="font-size: 13pt; font-family: Calibri; color: #0070c0;">Cost of

<p style="margin: 0;"><a

<strong><span style="font-family: Calibri;">This measure can reveal a great deal

<b><span style="font-family: Calibri; color: red;">Excess Inventory increases

<b><span style="font-size: 12pt; font-family: Calibri; color: #0070c0;">Account

<span style="font-size: 10pt; font-family: Symbol;"> </span><b><span

<span style="font-size: 10pt; font-family: Symbol;"> </span><b><span

<span style="font-size: 10pt; font-family: Symbol;"> </span><b><span

<b><span style="font-size: 12pt; font-family: Calibri; color: #0070c0;">Watching

<span style="font-family: Calibri;"><strong>Accounts Payable </strong>turnover

<span style="font-family: Calibri;">

<b><span style="font-family: Calibri;">As trade payables provide a free source of

<span style="font-size: 12pt; font-family: Calibri; color: black;">This is also called

<b><span style="font-size: 14pt; font-family:

<b><span style="font-size: 14pt; font-family: Calibri;">Efficiency (or Turnover)

black;">ratio tells you how many dollars of </span><span style="font-family:

<b><span style="font-size: 12pt; font-family: Calibri; color: #0070c0;">A company

<b><span style="font-family: Calibri;">But please note that sneaky little qualifier,

<b><span style="font-size: 14pt; font-family: Calibri; color:

<b><span style="font-size: 13pt; font-family: Calibri;">How Leasing PPE affect the

<b><span style="font-family: Calibri;">If a company leases much of its equipment

Incidentally, a lease must meet specific requirements to qualify as an <b>operating

<b><span style="font-size: 14pt; font-family: Calibri; color:

<b><span style="font-size: 12pt; font-family: Calibri;">Total asset turnover gauges

#0070c0;">If you can cut average receivables, total asset turnover

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<p lang="x-IV_mathan" style="margin: 0in; font-family: 'Cambria Math'; font-size:

<span style="font-family: Calibri; font-size: 11.0pt; color: black;"><span