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Monday, May 30, 2011

Cash Turnover Ratio Analysis

Definition: Cash Turnover Ratio shows the number of times that cash turnover in a year. A lower ratio may indicate the inefficient use of working capital.

Formula:
Cash Turnover = Cost of sales / Cash
Or,
Cash Turnover Ratio = 365 days / Cash balance ratio

Example 1:
Info Ltd. has the following data:
Opening stock $20,000
Closing stock $10,000
Purchases $6,000
Purchase returns $1,000
Cash

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