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
Inventory Turnover Ratio Formula dictates how fast a company replaces a current batch of inventories and transforms the inventories into sales.
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.