|FINAL PROJECT RATIOS | LIQUIDITY AND ACTIVIY Current Ratio measures the ability of a firm to pay its short-term debts. The formula is: |Current Ratio |= |Current Assets | | | |Current Liabilities | Quick (Acid-Test) Ratio measures the immediate ability of a firm to pay its short-term debts. The formula is: |Current Ratio |= |Cash + Marketable Securities …show more content…
The formula is: |Free Cash Flow = |Net cash provided by | | |operating activities – Capital Expenditures – Dividends | Accounts Receivable Turnover measures the number of times, on average, the company collects receivables in the period. The formula is: |Accounts Receivable Turnover |= |Net Sales or Net Revenues | | | |Average Accounts Receivable | Days’ Sales Outstanding measures days required to collect receivables from customers. The formula is: |Days’ Sales Outstanding |= |Ending Accounts Receivable |X 365 days | | | |Net Sales or Net Revenues | | Inventory Turnover measures the number of times, on average, the company sells inventory in the period. The formula is: |Inventory Turnover |= |Cost of Goods Sold | | | |Average Inventory | Days’ Sales in Inventory measures days required to sell inventory. The formula is: |Days’ Inventory
Current Ratio: Current ratio measures the capability of the company in paying current liability. Higher the current ratio, better the liquidity position of the company. Generally, a current
The quick ratio denotes that the company's ability should satisfy the short-term obligations. In brief, how many times can the firm respond its current liabilities by using current assets without the final stock? As many times it can cover its obligations, as better for the company.
|Inventory turnover |180,000/5000 |36 |N/A |Inventory turnover is calculated to determine how quickly the inventory is used based on the services rendered.|
We began with a look at your efficiency ratio, concentrating on your receivables turn over for the past year. This reflects the time between your sale and actual collection. If a company 's Turnover
Asset turnover depicts investment efficiency, because it shows how many sales dollars are generated for every dollar invested in the company’s assets. Lowe’s had relatively lower asset turnover ratios than Home Depot because their recent investment in PP&E.
The inventory turnover ratio "measures the number of times on average the inventory sold during the period; computed by dividing cost of goods sold by the average inventory during the period" (Kimmel et al, 2007, p. 292). This indicates how quickly a company sells its goods and a high ratio "suggests that management is reducing the amount of inventory on hand, relative to sales" (Kimmel et al, 2007, p. 287).
Total asset turnover : This ratio measures the efficiency of a company’s use of its assets
Through the use of an Inventory Turnover Ratio formula, the One Stop DECA Shoppe is able to determine the average stock turnover. (Annual cost of goods sold divided by Inventory = Average stock turnover).
Current Ratio is the measure of short-term liquidity. It indicates that the ability of an entity to meet its
Another ratio we will look at is total asset turnover rate. Total asset turnover rate measures how efficiently a company uses its assets to generate sales. In 2001 the total asset turnover rate was 1.079 and in 2000 it was 1.193. The fixed asset turnover ratio is similar to the total asset turnover ratio but includes only fixed assets. The fixed asset turnover rate measures the capacity utilization and the quality of fixed assets and was 3.771 for 2001 and 3.854 for 2000.
A third activity ratio is the inventory turnover ratio, which indicates the effectiveness with which the company is employing inventory. Since inventory is recorded on the balance sheet at cost (not at its sales value), it is advisable to use cost of goods sold as the measure of activity. The inventory turnover figure is calculated by dividing cost of goods sold by inventory:
This group of ratios emphasis can easily indicate the Amcor’s capability to meet short term debt obligations. Current ratio and Quick ratio will be calculated in this part. These two ratios are quite similar, short term creditors, such as bankers and suppliers are interested in this class of ratios, because they can measure the short term debt-paying ability of company.
The Quick Ratio also known as Acid Ratio is used by firms to determine liquidity position. It explains if the firm is able to pay all of their current debt liabilities. (Dyson, 2010) The graph above illustrates that over the period from 2007 to 2011 quick ratio was not more that 1, which means that their debts might not be covered all. The graph also indicates that a peak was in 2011.
In this ratio he explains about the three types of business inventory like raw materials, work in progress and finished goods. Formula to find the inventory turnover ratio and average age of inventory is: - inventory turnover = costs of goods sold/average inventory, Average age of inventory = 360 days/inventory turnover ratio.