Accounting / July 24, 2018 / Leah Johns
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.
One of the most common needs for working capital occurs when a business must increase its inventory and accounts receivable in order to grow its customer base and revenues. Let’s first be clear on what the term ‘working capital’ really means. From an accounting standpoint, working capital = current assets - current liabilities. Current assets are short term in nature and can be converted quickly to cash, primarily accounts receivable and inventory. Current liabilities are obligations that come due within one year, primarily accounts payable and short term debt.
Refers to the overall wealth of a business as demonstrated by its cash accounts, assets, and investments. Often called "fixed capital," it refers to the long-term worth of the business. Capital can be tangible, like durable goods, buildings, and equipment, or intangible such as intellectual property.
The upshot: while convertible bonds have greater appreciation potential than corporate bonds, they are also more vulnerable to losses if the issuer defaults (or fails to make its interest and principal payments on time). For that reason, investors in individual convertible bonds should be sure to conduct extensive credit research.
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