3.6 Debt Ratio Analysis (Equity Ratio Analysis)
5th Edition
5th Edition
Efficiency ratios is what we learn in this chapter. These calculations include stock turnover, debtor days, creditor days and the gearing ratio.
The stock turnover calculation measures how fast a business sells their inventory of products.
The debtor days calculation measures how long it takes for a business to collect its debts from customers.
The creditor days calculation measures how fast a business can pay back its debts.
The gearing ratio calculation shows the percentage of debt that is included in a company's bank account.
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Key Terms: Creditor vs. Debtor
Key Term: Ratio Analysis
Video: Five Financial Ratios Explained In 5 Minutes
Video: What Are Receivables and Payables?
Exam Tip: Five Major Limitations Of Financial Ratios
Video: What Is Inventory Turnover?
Video: How To Calculate Stock Turnover
Video: The Inventory Turnover Ratio
Video: Advanced Explanation Of The Value Of Calculating And Understanding The Inventory Turnover Number (Write it all down and say this on the exam!)
Exam Tip: A Worked Out Example Of A "Stock Turnover" Question
Video: How To Calculate Debtor Days
Video: "Receivables Days/Debtor Days" Ratio
Video: 5 Tips For Improving Debtor Management - Take notes and say this on the exam
Exam Tip: A Worked Out Example Of A "Debtor Days" Question
Video: Creditor Days (365 calculation)
Video: "Creditor Days/Payables Days" Review
Exam Tip: A Worked Out Example Of A "Creditor Days" Question
Video: Gearing Ratio
Video: The Ratio Analysis Called "Gearing"
Exam Tip: A Worked Out Example Of A "Gearing Ratio" Question
Exam Tip: How To Change The Gearing Ratio
Key Term: Efficiency vs Liquidity
Handout: Is A High Gearing Ratio Always Bad?
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Video: Giant Review Of Liquidity and Efficiency Ratios - Take Notes On This
Video: Quick Review Of The Limitations Of Ratio Analyses (You Need To Say This Along With Your Calculations) - Take Notes On This Again
Handout: On The IB Exam Day You Get This Formula Sheet With ALL Of The Ratio Analysis Formulas! List The Names Of The Formulae Provided On Exam Day.
Be Able To Explain How A Business Can Improve Their Efficiency Ratios
Handout: Exam Tip & Review Assignment- Take Notes On This
Exam Practice: Stock Turnover & Debtor Days (= Efficiency Ratios) + Current Ratio (= Liquidity Ratio)
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Exam Tip: Practice The Ratio Calculations With Your IA Business :)
Bonus #1 An Excel Worksheet That Calculates The Financial Data For You
Bonus #2 A Blank Ratio Analysis Table To Use For Your IA Or EE
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