Accounting / July 19, 2018 / Collins Barber
These represent your small business’s obligations to pay debts owed to lenders, suppliers, and creditors. Sometimes referred to as AP or AP for short, these liabilities can be short or long term depending upon the type of credit provided to the business by the lender.
The Inventory Turnover and Days' Inventory Ratios measure the firm's management of its Inventory. In general, a higher Inventory Turnover Ratio is indicative of better performance since this indicates that the firm's inventories are being sold more quickly. However, if the ratio is too high then the firm may be losing sales to competitors due to inventory shortages. The Inventory Turnover Ratio is calculated by dividing Cost of Goods Sold by Inventory. When comparing one firms's Inventory Turnover ratio with that of another firm it is important to consider the inventory valuation methid used by the firms.
We Also Think You’ll Like