Ratio analysis Required Match each of the following ratios with the formula used to compute it. 1.
Question:
Required
Match each of the following ratios with the formula used to compute it.
1. Working capital a. Net income + Average total stockholders' equity b. Cost of goods sold + Average inventory c. Current assets - Current liabilities d. 365 + Inventory turnover e. Net income + Average total assets f. (Net income - Preferred dividends) - Average outstanding common shares g. (Current assets - Inventory - Prepaid expenses) + Current liabilities h. Total liabilities + Total assets i. 365 + Accounts receivable turnover j. Total liabilities + Total stockholders' equity k. Net credit sales + Average accounts receivables I. Current assets + Current liabilities 2. Current ratio 3. Quick ratio 4. Accounts receivable turnover 5. Average days to collect 6. Inventory turnover 7. Average days to sell inventory 8. Debt to assets ratio 9. Debt to equity ratio 10. Return on investment 11. Return on equity 12. Earnings per share
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Fundamental Managerial Accounting Concepts
ISBN: 978-0078110894
6th Edition
Authors: Edmonds, Tsay, olds
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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