Yeta account receivable turnover ratio.7/14/2023 ![]() Relevance and Use of Turnover Ratio Formula (Weighted average can also be considered)Īverage Total Assets is the average of total assets held by the company throughout the period under consideration is calculated by taking into account both opening and closing figures and dividing it by two. Average Accounts Receivable is the average outstanding amount that is still not realized from the receivables it is calculated by taking into account both opening and closing figures and dividing it by two. without receiving the full amount for it immediately. Subtracting Current Assets calculate working Capital with Current Liabilities it shows the amount which is invested in the entity throughout the year in liquid assets.Īccounts Receivable Turnover Ratio = Credit Sales / Average Accounts ReceivableĬredit Sales are the sales made on credit, i.e. Net sales are the sales amount less any sales return or any discount offered (it may be a cash discount or bulk purchase discount). Working Capital Turnover Ratio = Net Sales / Working Capital. Average Inventory is the amount of inventory maintained during the year on average it is arrived at by dividing opening inventory plus closing inventory by two. The formula for Turnover Ratio can be calculated by using the following points:Ĭost of Goods Sold is the total cost of the goods sold during the period under consideration. Total assets turnover ratio of 1.28 times shows that net sales are above average total assets, which are always favorable to have, though it should be compared to previous year’s data as well as other players in the industry to have a complete analysis.
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