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FINANCIAL STATEMENT ANALYSIS  EFFICIENCY RATIOS  DSO 


Financial Statement Analysis  Efficiency RatiosEfficiency Ratios:Efficiency ratios are ratios that come off the the Balance Sheet and the Income Statement and therefore incorporate one dynamic statement, the income statement and one static statement , the balance sheet. These ratios are important in measuring the efficiency of a company in either turning their inventory, sales, assets, accounts receivables or payables. It also ties into the ability of a company to meet both its short term and long term obligations. This is because if they do not get paid on time how will you get paid paid on time. You may have perhaps heard the excuse 'I will pay you when I get paid' or 'My customers have not paid me!' FIRST EFFICIENCY RATIO
The formula: Regular DSO = (Total Accounts Receivables/Total Credit Sales) x Number of Days in the period that is being analyzed An example from our Balance sheet and Income Statement:
The Interpretation:
Review the Industry Norms and Ratios for this ratio to compare and see if they are above below or equal to the others in the same industry. To use the Regular DSO Calculator Click here click here . SECOND EFFICIENCY RATIO
The formula: Inventory Turnover Ratio = Net Sales / Inventory It could also be calculated as: Inventory Turnover Ratio = Cost of Goods Sold / Inventory An example from our Balance sheet and Income Statement:
The Interpretation:
Review the Industry Norms and Ratios for this ratio to compare their efficiency and see if they are above, below or equal to the others in the same industry. To use the Inventory Turnover Ratio Calculator Click here click here . THIRD EFFICIENCY RATIO
The formula: Accounts Payables to Sales Ratio = [Accounts Payables / Net Sales ] x 100 An example from our Balance sheet and Income Statement:
The Interpretation:
To use the Accounts Payables to Sales Ratio Calculator Click here click here .


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