5 current ratio current assetscurrent liabilities if

(5.) Current Ratio = Current Assets/Current Liabilities
If Current Assets and Current Ratio is known, Current
Liabilities = Current Assets/Current Ratio
If Current Liabilities and Current Ratio is known,
Current Assets = Current Liabilities X Current Ratio
250000/69500 = 3.6
250000/3.6 = 69500
69500 X 3.6 = 250000
Used to measure a company’s ability to service the liabilities.
3.6 is a good value but cab be improved by lowering the value
of the liabilities or increasing the assets.
(6.) Working Capital = Current Assets – Current
Liabilities
250000 – 69500 =
190500
(7.) Non-cash Working Capital = (Accounts Receivable
+ Inventory) – Current Liabilities
110000+125000-
69500=165000
Income Statement and Balance Sheet . .
(8.) Working Capital Turnover = Sales/Working Capital 1000000/190500 =
5.25
This is the amount of money a company uses to run its
everyday business. The value given in this case is quite good
©William G. Donohoo 7/28/2014

4
If Working Capital and Working Capital Turnover are
known, Sales = Working Capital X Working Capital
Turnover
If Sales and Working Capital Turnover are known,
Working Capital = Sales/Working Capital Turnover
190500 X 5.25 =
1000000
1000000/5.25 =
190500
and can be improved by increasing the assets.
(9.) Asset Turnover = Sales / Assets
If Sales and Asset Turnover are known, Assets =
Sales/Asset turnover
If Assets and Asset Turnover are known, Sales = Assets
X Asset Turnover
1000000/385000 = 2.6
1000000/2.6 = 385000
385000 X 2.6 =
1000000
It is the efficiency of a company’s assets in producing sales.
Can be used to calculate the sales or assets of a company. The
value given is good but could be improved by increasing the
sales.
(10.) Days Cash Usage on Hand = Cash/(Sales/365) 25000/(1000000/365)
= 9.13
Estimation of the number of days a company can run with the
cash at hand currently. The value is good.
(11.) (DSO) Accounts Receivable Days Outstanding =
Accounts Receivable/(Sales/365)
If Accounts Receivable and Accounts Receivable Days
Outstanding are known, Sales = Accounts
Receivable/Accounts Receivable Days Outstanding X
365
If Sales and Accounts Receivable Days Outstanding
are known, Accounts Receivable = Sales/365 X
Accounts Receivable Days Outstanding
110000/(1000000/365)
= 40.15
110000/40.15 X 365 =
1000000
1000000/365 X 40.15
= 110000
This is the number of days a company takes to get all the
account receivables. The value is bad. Can be improved by
effective correction of credits.
(12.) Inventory Turnover = Cost of Goods
Sold/Inventory
If Inventory and Inventory Turnover are known, Cost
of Goods Sold = Inventory X Inventory Turnover
If Cost of Goods Sold and Inventory Turnover are
known, Inventory = Cost of Goods Sold/Inventory
Turnover
(DIO) Inventory Days on Hand = Inventory/(Cost of
550000/125000 = 4.4
125000 X 4.4 =
550000
550000/4.4 = 125000
110000/(550000/365)
This is the number of days that a stock takes to be fully sold
out. The value is good but can be improved by promoting the
sales.