Financial ratio's - Efficiency

9 important questions on Financial ratio's - Efficiency

There are five ratios who can  consider some of the more important aspects of resource management, what are those five ratios?

  1. Average inventories' turnover period ratio
  2. average settlement period for trade receivables ratio
  3. average settlement period for trade payables ratio
  4. sales revenue to capital employed ratio
  5. sales revenue per employee ratio

What is the formula for the average inventories' turnover period ratio?

Average inventories' turnover period = average inventories held / cost of sales x 365

What does the average settlement period for trade RECEIVABLES ratio calculate?

How long, on average, credit customers take to pay the amounts that they owe tot he business.
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Average settlement period for trade receivables ratio formula

ASPTR = Average trade receivables / credit sales revenue x 365

What does the average settlement period for trade PAYABLES measure?

How long, on average, the business takes to pay those who have supplied goods and services to it on credit.

The formula for average settlement period for trade payables

ASPTP = average trade payables / credit purchases x 365

What does the sales revenue to capital employed ratio examines?

How effectively the asets of the business are being used to generate sales revenue

The formula for sales revenue to capital employed ratio

Sales revenue to capital employed ratio = Sales revenue / (share capital + reserves + non-current liabilities)

The formula for sales revenue per employee

Sales revenue per employee = sales revenue / number of employees

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