DuPont Model, Ratios and Indicators Flashcards
1
Q
What are the 2 different types of ratios
A
- Profitability
2. Liquidity
2
Q
What is the purpose of analysing ratios
A
They can be used to assess the effect of different strategies as well as analyse a businesses financial reports further
3
Q
Equation for Asset Turnover
A
Net Sales / Average Total Assets
4
Q
What does the Asset Turnover ratio show
A
The AT can indicate the quantity of sales that a business earns given its size.
5
Q
Define Asset Turnover
A
Asset turnover is an reflection of how well the business uses its assets to generate sales revenue
6
Q
Equation for Inventory Turnover
A
Average inventory / Cost of goods sold x 365
7
Q
What does the Inventory Turnover ratio show
A
The average number of days it takes before inventory is sold
