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topic 3.6: Efficiency ratio analyses
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  • Course
  • International Baccalaureate
  • Institution
  • International Baccalaureate

These are all the notes needed for the topic 3.6 of IB Business Management. This summarizes all relevant theories, formulas, data and information needed for IB learners.

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Document information

  • May 17, 2023
  • 3
  • 2022/2023
  • Class notes
  • Z fr
  • All classes

Subjects

  • business
  • business management
  • finance
  • topic 3
  • formulas
  • ratio
  • probability
  • sources
  • account
  • efficiency
  • analysis
  • stock turnover
  • debtor days
  • creditor days
  • gearing ratio

Written for

  • International Baccalaureate
  • International Baccalaureate
  • International Baccalaureate
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Set
Efficiency ratio

-Shows how well a firm's resources have been used, such as the amount
of time taken by firm to
the sell its stock/inventory or
average number
the
of days taken to money from
collect its debtors


sell their stock faster than
-

Ex:supermarkets luxury jewellers.


Stock turnover:


-Stock turnover ratio (inventory turnover ratio) number
measures the of times
a firm sells its stocks within a time period (usually 1 year).
Indicate the which firm sells all its stock.
-> speed at a
replenishes
->
The higher stock turnover, the
higher of
amount stock is sold

->
More efficient in
generate profit.

Stock turnover costs of goods sold
-




E
(number of times) average stock
in
* the
formula
sheet stock turnover
number ofdays) coteroid
=
165




-ways to
reduce stock level to improve stock turnover ratio:

·
Be replenished more regularly
-
to hold lower stock levels
·
Divestment (disposal) of stocks which are slow to sell

Getting firm's
rid of obsolete stock in the portfolio)
Reduce the range of products being stocked only keep best-
·
-




selling products.

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