Overhead to Sales:
Overhead (expenses) / Sales x 100 = %
Measures the amount of expenses in relation to sales
For every 1pound of sales how much is an expense
If the % is increasing:
1) the business is being less efficient and is paying more for its expenses - needs to control its costs
If the % is decreasing:
1) the business is being more efficient than it was- it has controlled its costs effectively.
Rate of stock turnover:
Cost of sales / Average stock = _ times
Measures the amount of times stock is being turned over in a year.
if the amount is increasing: (positive)
1) shows that the business is selling more stock
2) Could be due to the fact that the business is holding onto less average stock
If the amount is decreasing: (negative)
1) The business is selling less stock
2) The business is holding onto more average stock possibly leading to higher costs in storage.
further analysis: if the business is selling more stock, the reason it is selling more should also be considered. Maybe it was due to a sale which wouldn't have had a huge impact on the gross profit so wouldn't be very efficient.
Net current assets:
Current assets : Current liabilities = _: 1
Measures the amount of money/ asset the business has to pay its short term debts.
Acid test or Liquid capital ratio:
Liquid assets : Current liabilities = _: 1