This can be measured by using Activity Analysis ratios. One of these is the Accounts Receivable Turnover rate, which measures the average number of sale-collection cycles completed by the firm during the year. From the 2002 rate of 32.07 times, B&N enhanced their sales-collection efforts as proven by the rates 50... displayed 300 characters
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This development would find their ultimate effect in the increased sales figure of 11.47% and cash balance of 89.75%. As a result, collection time for sales also improved as can be determined by computing the Number of Day's Sales in Receivables. The rate of 4.7 days for the year 2004 is a vast improvement from 7... displayed next 300 characters
If the results are high then the firm has a better financial leverage. In order to measure the firm's ability to make their interest payments that are contracted they use the times interest earned ratio, times interest earned ratio = earnings before interest and taxes / interest (Gitman, 2006)...
This ratio is used to determine how effective the company is at keeping production costs low. Example: an operating profit margin of 0.17 indicates that after subtracting all operating expenses 17% of sales revenues remain...
The ratio is expressed in percentage terms and is as follows:
ROCE = x 100
ROCE = x 100 = 21.0% ROCE = x 100 = 15.1%
1.3. Net profit margin
Net profit margin is calculated by dividing net profit before interest and taxation by sales, gives the profit per dollar of sales:
Net profit margin = x 100
NPM = x 100 = 9...
Companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover.3 Some of the most used and examined ratios are the profitability ratios which measures performance to indicate what a company is earning on its sales, assets, or equity...
Use the Dupont equation to pinpoint the factors causing Avery Products to fall so far below the industry average.
To meet the industry average the basically need to try and keep the asset turnover constant but they need to quickly increase their returns on assets i...
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