Ratios Notes

Can use beginning ending inventories divided by 2

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Unformatted text preview: the books • Is unproductive & could cause a rate of return of zero or negative on the assets • Since inventory is a point in time measure, it would be better to use average inventory over the year & not necessarily year end. Can use (beginning + ending inventories) divided by 2. Evaluating Receivables: The Days Sales Outstanding (DSO) 1. DSO = Receivables/average sales per day (annual sales/365) 2. Also called the average collection period (ACP) 3. Some use 360 day years 4. If longer than average, means not collecting equally with other firms and could mean their customers are not financially strong (if policy is 30 days and average collections are 46 days.) Evaluating...
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This note was uploaded on 11/05/2013 for the course BUS 441 taught by Professor Ardalan during the Spring '12 term at Marist.

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