DuPont Model, Ratios and Indicators Flashcards Preview

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Flashcards in DuPont Model, Ratios and Indicators Deck (7)
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What are the 2 different types of ratios

1. Profitability
2. Liquidity


What is the purpose of analysing ratios

They can be used to assess the effect of different strategies as well as analyse a businesses financial reports further


Equation for Asset Turnover

Net Sales / Average Total Assets


What does the Asset Turnover ratio show

The AT can indicate the quantity of sales that a business earns given its size.


Define Asset Turnover

Asset turnover is an reflection of how well the business uses its assets to generate sales revenue


Equation for Inventory Turnover

Average inventory / Cost of goods sold x 365


What does the Inventory Turnover ratio show

The average number of days it takes before inventory is sold