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Set out below are ratios relating to three different businesses. Each business operates within a different industrial

Question:

Set out below are ratios relating to three different businesses. Each business operates within a different industrial sector.
Set out below are ratios relating to three different businesses.

Required:
State, with reasons, which of the above is:
(a) A holiday tour operator
(b) A supermarket chain
(c) A food manufacturer.

Transcribed Image Text:

A Co. 3.6% 2.4 times B Co. 9.7% 3.1 times C Co. 6.8% 1.7 times Ratio Operating profit margin Sales revenue to capital employed Inventory turnover period Collection period for receivables Current ratio 18 days 2 days 0.8 times n/a 12 days 0.6 times 44 days 26 days 1.5 times

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Three businesses a B Co is the holiday tour operator We can see that the sales revenue to capital employed ratio is the highest of the three businesse...View the full answer


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Financial Management for Decision Makers

Financial Management for Decision Makers

ISBN: 978-0138011604

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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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