Efficiency ratios

• What does the efficiency ratio measure?

  Measures how efficiently it manages its finances and uses its inventory.
• What do trade receivable days measure?


  Average number of day debtors take to pay their invoices.
• Trade receivable days calculation 


  (Trade receivables/credit sales)x 365
• What do trade payable days measure?

  Average number of days for business to pay its suppliers (creditors)
• Trade payable days calculation

  (Trade payables/credit purchases) x 365
• What does inventory turnover measure?

  Average number of days a business holds its stock
• Inventory turnover calculation

  (Average inventory/cost of sales) x 365