Accounting / July 19, 2018 / Ariyah Lang
This means that you divide net sales, from the income statement, from the inventory figure on the balance sheet and you get a number that is a number of times. That number signifies the number of times inventory is sold and restocked each year. If the number is high, you may be in danger of stockouts. If it is low, watch out for obsolete inventory.
When one thinks of how successful or unsuccessful a business is doing, it’s natural to lean towards the strategic elements of an organization that ensure profits come in: investments, funding decisions and risk management. While these elements are important, the success of a business, especially how it runs its day to day operations, is highly dependent on the effective management of operational cash (or commonly called cash flow or cash on hand). This comes in the form of accounts payable (AP) and accounts receivable (AR).
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