Business Administration - Management FIS403 Lecture Notes - Lecture 3: Accounts Payable, Inventory Turnover, Asset Turnover
Asset Utilization Ratios
Also known as efficiency ratios
Purpose:
How effectively is the company using its assets?
How quickly are they selling their product and collecting the money?
Asset Utilization Ratios
Receivables turnover - times
Average collection period
– number of
days
Inventory turnover – times
Inventory holding period – number of days
Asset Utilization Formulas
Receivables Turnover = Sales (credit)
Accounts
Receivable
Average Collection Period =
Accounts Receivable
Average Daily Credit Sales
Asset Utilization Formulas
Inventory Turnover = Cost of Goods Sold
Inventory
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