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Part A) Explain in the meaning of each of the ratios 1. Current ration A measure used to evaluate a companyˇ¦s liquidity and short-term debt-paying ability, calculated by dividing current assets by current liabilities. 2. Receivables turnover A measure of the liquidity of receivables, calculated by dividing net credit sales by average net receivable. 3. Average collection period The average amount of time that a receivable is outstanding, calculated by dividing 365 days by the receivable turnover. 4. Inventory turnover A ratio that measures the number of time on average the inventory has been sold during the period, calculated by dividing cost of goods sold by the average inventory during the period.
Approximate Word count = 350 Approximate Pages = 1.4 (250 words per page double spaced)
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