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asset efficiency analysis?
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 turnoverInventory turnover = Cost of goods sold / Average inventoryAverage inventory = (Opening inventory + Closing inventory) / 2b) Receivables turnoverReceivables turnover = Revenue / Average receivablesAverage receivables = (Opening receivables + Closing receivables) / 2
Asset management ratios?
Generally Asset Management ratios is an attempt to compare a company's revenue to their available assets. In other words a company's ability to manage their assets to better sales is measured.
What is Target Corp's inventory turnover ratio?
Forbes.com has an up-to-date (Last 12 months) list of ratios for companies. In the last 12 months (From 11/15/11), Target as an inventory turnover of 6.0.
What is management accounting explain ratio analysis in detail?
Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratio analysis can predict future bankruptcy. Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used: • Liquidity ratios • Asset turnover ratios • Financial leverage ratios • Profitability ratios • Dividend policy ratios Liquidity Ratios Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending short-term credit to the firm. Two frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick ratio. The current ratio is the ratio of current assets to current liabilities: Current Ratio = Current Assets Current Liabilities Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders may prefer a lower current ratio so that more of the firm's assets are working to grow the business. Typical values for the current ratio vary by firm and industry. For example, firms in cyclical industries may maintain a higher current ratio in order to remain solvent during downturns. One drawback of the current ratio is that inventory may include many items that are difficult to liquidate quickly and that have uncertain liquidation values. The quick ratio is an alternative measure of liquidity that does not include inventory in the current assets. The quick ratio is defined as follows: Quick Ratio = Current Assets - Inventory Current Liabilities The current assets used in the quick ratio are cash, accounts receivable, and notes receivable. These assets essentially are current assets less inventory. The quick ratio often is referred to as the acid test. Finally, the cash ratio is the most conservative liquidity ratio. It excludes all current assets except the most liquid: cash and cash equivalents. The cash ratio is defined as follows: Cash Ratio = Cash + Marketable Securities Current Liabilities The cash ratio is an indication of the firm's ability to pay off its current liabilities if for some reason immediate payment were demanded. Asset Turnover Ratios Asset turnover ratios indicate of how efficiently the firm utilizes its assets. They sometimes are referred to as efficiency ratios, asset utilization ratios, or asset management ratios. Two commonly used asset turnover ratios are receivables turnover and inventory turnover. Receivables turnover is an indication of how quickly the firm collects its accounts receivables and is defined as follows: Receivables Turnover = Annual Credit Sales Accounts Receivable The receivables turnover often is reported in terms of the number of days that credit sales remain in accounts receivable before they are collected. This number is known as the collection period. It is the accounts receivable balance divided by the average daily credit sales, calculated as follows: Average Collection Period = Accounts Receivable Annual Credit Sales / 365 The collection period also can be written as: Average Collection Period = 365 Receivables Turnover Another major asset turnover ratio is inventory turnover. It is the cost of goods sold in a time period divided by the average inventory level during that period: Inventory Turnover = Cost of Goods Sold Average Inventory The inventory turnover often is reported as the inventory period, which is the number of days worth of inventory on hand, calculated by dividing the inventory by the average daily cost of goods sold: Inventory Period = Average Inventory Annual Cost of Goods Sold / 365 The inventory period also can be written as: Inventory Period = 365 Inventory Turnover Other asset turnover ratios include fixed asset turnover and total asset turnover. Financial Leverage Ratios Financial leverage ratios provide an indication of the long- term solvency of the firm. Unlike liquidity ratios that are concerned with short-term assets and liabilities, financial leverage ratios measure the extent to which the firm is using long term debt. The debt ratio is defined as total debt divided by total assets: Debt Ratio = Total Debt Total Assets The debt-to-equity ratio is total debt divided by total equity: Debt-to-Equity Ratio = Total Debt Total Equity Debt ratios depend on the classification of long-term leases and on the classification of some items as long-term debt or equity. The times interest earned ratio indicates how well the firm's earnings can cover the interest payments on its debt. This ratio also is known as the interest coverage and is calculated as follows: Interest Coverage = EBIT Interest Charges where EBIT = Earnings Before Interest and Taxes Profitability Ratios Profitability ratios offer several different measures of the success of the firm at generating profits. The gross profit margin is a measure of the gross profit earned on sales. The gross profit margin considers the firm's cost of goods sold, but does not include other costs. It is defined as follows: Gross Profit Margin = Sales - Cost of Goods Sold Sales Return on assets is a measure of how effectively the firm's assets are being used to generate profits. It is defined as: Return on Assets = Net Income Total Assets Return on equity is the bottom line measure for the shareholders, measuring the profits earned for each dollar invested in the firm's stock. Return on equity is defined as follows: Return on Equity = Net Income Shareholder Equity
How do you think financial ratios differ across different industries?
Financial ratios can vary significantly across industries due to differing business models, capital structures, and operational metrics. For instance, capital-intensive industries like manufacturing typically exhibit lower profitability ratios compared to service-oriented sectors, which may have higher margins but lower asset turnover. Additionally, industries like retail might focus on inventory turnover ratios, while technology firms may prioritize growth metrics like price-to-earnings ratios. Thus, it's crucial to analyze financial ratios within the context of industry norms to draw meaningful conclusions.
What are Activity Ratios?
Activity Ratios or Efficiency Ratios are used to measure the effectiveness of a firm's use of resources. Good companies would always put their resources to optimum utilization. Better the activity or efficiency ratio, the better it is for the company and it means the company is utilizing its resources properly and effectively. The ratios that come under this category are: 1. Average Collection Period 2. Degree of Operating Leverage 3. Days Sales Outstanding Ratio 4. Average payment period 5. Asset Turnover Ratio 6. Stock Turnover Ratio 7. Receivables Turnover Ratio
What ratios are short-term lenders interested in?
I would think liquidity ratios, cash flow, days in receivables, and inventory turns might be a part of their interests. Lender will check following - 1. Leverage (TOL/TNW & TD/TNW) - irrespective of the tenor/type of loan 2. Liquidity Ratio 3. Liquidity Ratios ( current Ratio, inventory turnover ratio, debtors & creditors turnover ratio) 4. Net Working capital - to assess working capital requirement 5. ISCR- Interest service coverage ratio to check capacity to repay interest (in case of CCor OD) 5 DSCR - Debt Service coverage ratio to check capacity to repay interest+ capital (in case of term loan)
What ratios are short term lenders interested in?
I would think liquidity ratios, cash flow, days in receivables, and inventory turns might be a part of their interests. Lender will check following - 1. Leverage (TOL/TNW & TD/TNW) - irrespective of the tenor/type of loan 2. Liquidity Ratio 3. Liquidity Ratios ( current Ratio, inventory turnover ratio, debtors & creditors turnover ratio) 4. Net Working capital - to assess working capital requirement 5. ISCR- Interest service coverage ratio to check capacity to repay interest (in case of CCor OD) 5 DSCR - Debt Service coverage ratio to check capacity to repay interest+ capital (in case of term loan)
Types of ratios?
1 - Actiivty raios 2 - turnover ratios 3 - Profitability ratios 4 - Liquidity Ratios
Where are key financial ratios?
Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:Liquidity ratiosAsset turnover ratiosFinancial leverage ratiosProfitability ratiosDividend policy ratiosLiquidity RatiosLiquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending short-term credit to the firm. Two frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick ratio.The current ratio is the ratio of current assets to current liabilities:Current Ratio = Current Assets/Current LiabilitiesShort-term creditors prefer a high current ratio since it reduces their risk. Shareholders may prefer a lower current ratio so that more of the firm's assets are working to grow the business. Typical values for the current ratio vary by firm and industry. For example, firms in cyclical industries may maintain a higher current ratio in order to remain solvent during downturns.One drawback of the current ratio is that inventory may include many items that are difficult to liquidate quickly and that have uncertain liquidation values. The quick ratio is an alternative measure of liquidity that does not include inventory in the current assets. The quick ratio is defined as follows:Quick Ratio = (Current Assets - Inventory)/Current LiabilitiesThe current assets used in the quick ratio are cash, accounts receivable, and notes receivable. These assets essentially are current assets less inventory. The quick ratio often is referred to as the acid test.Finally, the cash ratio is the most conservative liquidity ratio. It excludes all current assets except the most liquid: cash and cash equivalents. The cash ratio is defined as follows:Cash Ratio = (Cash + Marketable Securities)/Current LiabilitiesThe cash ratio is an indication of the firm's ability to pay off its current liabilities if for some reason immediate payment were demanded.Asset Turnover RatiosAsset turnover ratios indicate of how efficiently the firm utilizes its assets. They sometimes are referred to as efficiency ratios, asset utilization ratios, or asset management ratios. Two commonly used asset turnover ratios are receivables turnover and inventory turnover.Receivables turnover is an indication of how quickly the firm collects its accounts receivables and is defined as follows:Receivables Turnover = Annual Credit Sales/Accounts ReceivableThe receivables turnover often is reported in terms of the number of days that credit sales remain in accounts receivable before they are collected. This number is known as the collection period. It is the accounts receivable balance divided by the average daily credit sales, calculated as follows:Average Collection Period = Accounts Receivable/Annual Credit Sales / 365The collection period also can be written as:Average Collection Period = 365/Receivables TurnoverAnother major asset turnover ratio is inventory turnover. It is the cost of goods sold in a time period divided by the average inventory level during that period:Inventory Turnover = Cost of Goods Sold/Average InventoryThe inventory turnover often is reported as the inventory period, which is the number of days worth of inventory on hand, calculated by dividing the inventory by the average daily cost of goods sold:Inventory Period = Average Inventory/Annual Cost of Goods Sold / 365The inventory period also can be written as:Inventory Period = 365/Inventory TurnoverOther asset turnover ratios include fixed asset turnover and total asset turnover.Financial Leverage RatiosFinancial leverage ratios provide an indication of the long-term solvency of the firm. Unlike liquidity ratios that are concerned with short-term assets and liabilities, financial leverage ratios measure the extent to which the firm is using long term debt.The debt ratio is defined as total debt divided by total assets:Debt Ratio = Total Debt/Total AssetsThe debt-to-equity ratio is total debt divided by total equity:Debt-to-Equity Ratio = Total Debt/Total EquityDebt ratios depend on the classification of long-term leases and on the classification of some items as long-term debt or equity.The times interest earned ratio indicates how well the firm's earnings can cover the interest payments on its debt. This ratio also is known as the interest coverage and is calculated as follows:Interest Coverage = EBIT/Interest Chargeswhere EBIT = Earnings Before Interest and TaxesProfitability RatiosProfitability ratios offer several different measures of the success of the firm at generating profits.The gross profit margin is a measure of the gross profit earned on sales. The gross profit margin considers the firm's cost of goods sold, but does not include other costs. It is defined as follows:Gross Profit Margin = (Sales - Cost of Goods Sold)/SalesReturn on assets is a measure of how effectively the firm's assets are being used to generate profits. It is defined as:Return on Assets = Net Income/Total AssetsReturn on equity is the bottom line measure for the shareholders, measuring the profits earned for each dollar invested in the firm's stock. Return on equity is defined as follows:Return on Equity = Net Income/Shareholder EquityDividend Policy RatiosDividend policy ratios provide insight into the dividend policy of the firm and the prospects for future growth. Two commonly used ratios are the dividend yield and payout ratio.The dividend yield is defined as follows:Dividend Yield = Dividends Per Share/Share PriceA high dividend yield does not necessarily translate into a high future rate of return. It is important to consider the prospects for continuing and increasing the dividend in the future. The dividend payout ratio is helpful in this regard, and is defined as follows:Payout Ratio = Dividends Per Share/Earnings Per Share
What type of ratio is used to measure activity?
An activity ratio, such as asset turnover or inventory turnover, is typically used to measure how efficiently a company is utilizing its assets to generate revenue. These ratios help assess the company's operational efficiency and effectiveness.
profitability ratios?
these are ratios which analyze profitability of a company. higher ratios imply higher profitability and value of a company.
