Financial Efficiency Ratios

Question 1

What do financial efficiency ratios tell us

Answer 1

Tells us how effectively a business is managing its assets

Question 2

What 4 efficiency ratios are there

Answer 2

1) Assets turnover
2) Stock turnover
3) Receivable days
4) Payable days

Question 3

Equation for assets turnover

Answer 3

Revenue/Assets

Question 4

The higher asset turnover the….

Answer 4

Better

Question 5

When are comparisons of assets turnover meaningful

Answer 5

When they are made for different companies within the same sector

Question 6

Stock turnover equation

Answer 6

Stock turnover = Cost of sales / average stock held

Question 7

What does a stock turnover of 7 mean

Answer 7

Means you go through your warehouse stock 7 times a year