Operating Capacity Ratio Analysis
Frank J. Fabozzi accent,Pamela P. Peterson
《Financial Management and Analysisbrowr》[M],2004
Using financial ratio analysis
Financial analysis provides information concerning a firm’s operating performance and financial condition. This information is uful to analysis in evaluating a firms operation and to an investor in evaluating the risk and potential returns to investing in a firms curities
Activity ratios
Activity ratios - for the most part, turnover ratios can be ud to evaluate the benefits produced by specific asts, such as inventory or accounts receivable or to evaluate the benefits produced by the totality of the firms asts.
Inventory management
The inventory turnover ratio indicates how quickly a firm has ud inventory to onexgenerate the goods and rvices that are sold. The inventory turnover is the ratio of the cost of goods sold to inventory:
Inventory turnover ratio=Cost of goods sold/Inventory
潜行深渊
Accounts receivable management
In much the same way we evaluated inventory turnover, we can evaluate a firms management of its accounts receivable and its cspaldingredit policy. The account receivable turnover ratio is a measure of how effectively a firm is using credit extended to customers. The reason for extending credit is to increa sales. The downside to extending credit is the possibility of default -customers not paying when promid. The benefit obtained from extending credit is referred to as netimportant的反义词 credit sales -sales on credit less returns and refunds.
Accounts receivable turnover=Net credit sales/ Accounts receivable
past是什么意思Overall ast management
The inventory and accounts receivable turnover ratios reflect the benefits obtained from the u of specific asts (inventory and accounts receivable.)For a more general picture of the productivity of the firm, we can compare the sales during a period with the total asts that generated the sales.
One way is with the total ast turnover ratio which tells us how many times during the year the value of a firm's total asts is generated in sales:
Total asts turnover=Sales/Total asts
An alternative is to focus only on fixed asts, the long-term, tangible asts of the firm. The fixed ast turnover is the ratio of sales to fixed asts:
Fixed ast turnover ratio=Sales/Fixed asts
Receivables Management
wirelessWhen a firm allows customers to pay for goods and rvices at a later date, it creates accounts receivable. By allowing customers to pay some time after they receive the goods or rvices, you are granting credit, which we refer to as trade credit. Trade credit, also referred to as merchandi credit or dealer credit, is an informal credit arrangement. Unlike other forms of credit, trade credit is not usually evidenced by notes, but rather is generated spontaneously: Trade credit is granted when a customer buys goods or rvices.
Monitoring Accounts Receivable: You can monitor how well accounts receivable are managed using financial ratios and aging schedules. Financial ratios can be ud to get an overall picture of how fast we collect on accounts receivable.
Aging schedules, which are breakdowns of the accounts receivable by how long they have been around, help you get a more detailed picture of your collection efforts.
You can get an idea of how quickly we collect our accounts receivable by calculating the Number of Days of Credit ,which is the ratio of the balance in accounts receivable at a poi
nt in time (say, at the end of a year) to the credit sales per day (on average, the dollar amount of credit sales during a day):
Number of days of credit = Accounts receivable/Credit sales per day
The number of days credit ratio, also referred to as the average collection period and days sales outstanding (DSO), measures how long, on average, it takes us to collect on our accounts receivable.
Inventory Management
Inventory is the stock of physical goods for eventual sale. Inventory consists of raw material, work-in-process, and finished goods available for sale. There are many factors in a decision of how much inventory to have on hand. As with accounts receivable, there is a trade off between the costs of investing in inventory and the harder to breathecosts of insufficient inventory. There’s a cost to too much inventory and there’s a cost of too little inventory.
Reasons for Holding Inventory: There are veral reasons to hold inventory.The most obv
ious is that if you ll a product, you cant transact business without inventory. Another obvious reason is that goods cannot be manufactured instantaneously. If you manufacture goods, you will likely have some inventory in various stages of production. This is referred to as work-in-process.
