Asset Turnover Ratio
These ratios indicate how efficiently assets of a firm are utilized to generate sales.
Receivables Turnover=Annual Credit Sales/Accounts Receivables
Collection Period=365/Debtors Turnover
The collection period indicates the speed of collection and the quality of a debtor.
Inventory Turnover =Cost of Goods Sold/Average Inventory
This shows the efficiency of the firm in producing and selling its product.
Inventory Turnover Period= 365/Inventory Turnover
Financial Leverage Ratio
These ratios describe the long-term financial position of a company.
Debt Ratio= Total Debt /Capital Employed
This ratio shows the long-term solvency of a firm and gives an idea of interest bearing debt.
Debt-Equity Ratio=Total Debt/Net Worth
This measures the contribution of lenders for each rupee of the owner’s contribution.