Inventory Turnover and Payables and Receivables 0.0 / 5 ? Business StudiesBusiness PlansA2/A-levelAQA Created by: nareen.lawkCreated on: 12-03-19 15:01 What is inventory? Raw materials, work-in-progress and finished goods held by a business to enable production and meet customer demand 1 of 17 What do financial efficiency rations analyse? Financial efficiency rations analyse how effectively a business is managing its assets 2 of 17 What are cost of sales? Sum of all direct costs associated with making a product 3 of 17 What is inventory turnover? Inventory (stock) turnover measures how often each year a business sells and replaces inventory 4 of 17 How is inventory turnover calculated? Cost of Sales / Inventories 5 of 17 What does a high inventory figure show? Stock is sold quickly, thus bringing money into the business more rapidly 6 of 17 How can holding more inventory help a business? It can improve customer service and allow the business to meet demand 7 of 17 What type of industries have a low inventory turnover? Construction, engineering, industrial distribution 8 of 17 What type of industries have a high inventory turnover? Supermarket retail, fast-food and motor vehicle production 9 of 17 How can a business increase its invetory turnover? Adopting a JIT system so less stock is held, reducing product range 10 of 17 What are receivables? Amounts OWED TO a business by customers 11 of 17 What are payables? Amounts OWED BY a business to suppliers and other 12 of 17 What are receivables days? The average number of days taken by customers to pay amounts owed 13 of 17 What are payables days? The average number of days taken by a business to pay amounts it owes 14 of 17 How do you calculate receivables days? Receivables / Sales Revenue X 365 15 of 17 How do you calculate payables days? Payables / Cost of Sales X 365 16 of 17 How do you calculate net current assets? Current assets - Current liabilities 17 of 17
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