working capital turnover ratio ideal
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External sources of finance are equity capital preferred stock debentures term loans venture capital leasing hire purchase trade credit bank overdraft factoring etc.
. Home Financial Ratio Analysis Cost of Goods Sold COGS Cost of goods sold often abbreviated COGS is a managerial calculation that measures the direct costs incurred in producing products that were sold during a period. The interest coverage ratio is used to determine the solvency of an organization in the nearing time as well as how many times the profits earned by that very organization were. By external sources we mean the capital arranged from outside the business unlike retained earnings which are internally generated out of the activity of a business.
An ideal debt-equity ratio for an organization is 21. It establishes relationship between cost of sales. Measures efficiency in working capital usage.
Current ratio The ideal benchmark for the current ratio is 21 where there are two dollars of current assets CA to cover 1 of current liabilities CL. The formula for debt-equity ratio is-Debt Equity Ratio Total Debts Shareholders Fund. Liquidity or Short-Term Solvency ratios Short-term funds management Working capital management is important as it signals the firms ability to meet short term debt obligations.
Return on Capital Employed ROCE. Working Capital Turnover Ratio Cost of sales Working capital turnover ratio Average working capital Opening closing working capital Average working capital 2 This ratio indicates the number of times the working capital is turned over in the course of the year.
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