The merchandise inventory turnover formula determines how often retail or wholesale companies purchase finished goods and resell them for a profit. These companies usually buy their products from a wide range of distributors, both domestic and international. Companies can calculate the inventory turnover formula using information from their balance sheet and income statements. The method depletion in...
Bookkeeping
This financial metric offers insight into a company’s operational efficiency, sales trends, and potential liquidity issues. Oftentimes, each industry will have an acceptable average inventory turnover ratio. Most businesses operating in a specific industry typically try to stay as close as possible to the industry average. Inventory turnover is the ratio of the cost of goods sold (COGS) to the average...
Again, current assets are resources that can quickly be converted into cash within a year or less, including cash, accounts receivable and inventories. The cash asset ratio, or cash ratio, also is similar to the current ratio, but it only compares a company’s marketable securities and cash to its current liabilities. Other measures of liquidity and solvency that are similar to the current ratio might...
The current ratio is an important measure of liquidity because short-term liabilities are due within the next year. The current ratio is 2.75 which means the company’s currents assets are 2.75 times more than its current liabilities. On the other hand, a company with a current ratio greater than 1 will likely pay off its current liabilities since it has no short-term liquidity concerns. An excessively...
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The person appraising the value of your business will want to take a historical look at your income trends that may or may not devalue your business. They will want to examine your financial records to identify potential for future growth, which will increase valuation. Therefore, outdated and inefficient transactional processing and a lack of formal documentation policies or financial controls can hurt...
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