This ratio helps us understand the how effectively the firm is utilizing its resources. This ratio effectively tracks the flow of cash from sales activity to receivables, inventory, and payables. Turnover Ratios types include the inventory turnover, receivables turnover and payables turnover. Also, you can calculate the cash conversion ratio using the three types of turnover ratio formulas to find out the length of cash cycle.
Inventory Turnover Ratio Formula dictates how fast a company replaces a current batch of inventories and transforms the inventories into sales.
Accounts Receivables Turnover Ratio formula is a measure that computes the proportion of how much net credit sales a firm has and how much average accounts receivables the firm is dealing with.
Accounts Payable is the money that needs to be paid to the suppliers of raw materials, services to the company. It is also shown as a liability in the balance sheet as it is a liability for the business.
Days Inventory Outstanding tells us how many days a company takes to turn its inventory into Sales.
Days in Inventory formula is used to see how many days the firm takes to transform inventories into finished stocks.
Days Sales Outstanding (DSO) is a calculation that shows – how good a company is in collecting its dues from its debtors.
Average Collection Period Formula is the time between the credit sales are made and the cash is paid.
Days payable outstanding helps measures the time a business takes to pay off its creditors.
Cash Conversion Cycle means how long the cash is tied up in inventory before the inventory is sold and cash is collected from the customers.