asset efficiency analysis

Answer 1

these ratios calculate the amount of revenue contributed by assets of a company. higher ratios imply higher revenue contributed and higher efficiency. some of the ratios calculated here are:

a) Inventory turnover

Inventory turnover = Cost of goods sold / Average inventory

Average inventory = (Opening inventory + Closing inventory) / 2

b) Receivables turnover

Receivables turnover = Revenue / Average receivables

Average receivables = (Opening receivables + Closing receivables) / 2

Answer 2

c) Days sales in inventory

Days sales in inventory = 365 days / Inventory turnover

d) Average collection period

Average collection period = 365 days / Receivables turnover

Answer 3

this is an assessment of whether assets of a company can contribute to earning profit. higher ratios imply higher asset efficiency.