Term
Inventory Conversion Period |
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Definition
Inventory
(Cost of Goods Sold / 365)
How many days it takes a company to convert inventory into payment. |
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Term
Receivables Collection Period (Days Sales Outstanding) |
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Definition
(Accounts Receivable / Sales) x 365 Days required to collect on receivables. |
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Term
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Definition
Payables
Credit Purchases Per Day *If purchases is not readily available, use EI = BI + Purchases - CoGS Time company takes to pay payables. |
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Term
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Definition
Inventory Conversion Period + Receivables Collection Period - Payables Deferral Period
Time, in days, it takes a compay to convert resource inputs into cash flows. |
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Term
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Definition
Cost of Goods Sold
Inventory How many times a company's inventory is sold and replaced over a period.
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Term
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Definition
Sales
Net Working Capital Measurement comparing the depletion of working capital to the generation of sales over a given period. |
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Term
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Definition
(Average Receivables + Average Inventory - Average Accounts Payable)
Average Daily Sales Expresses how much cash is tied up in Accounts Receivable and inventory, less Accounts Payable. |
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Term
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Definition
Current Assets
Current Liabilities
A company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). |
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Term
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Definition
(Current Assets - Inventory)
Current Liabilities More conservative than the current ratio, it excludes inventory from current assets because some companies cannot quickly turn their inventory into cash. |
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Term
| Cash Conversion Efficiency |
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Definition
Cash Flow From Operations
Sales Very similar to return on sales. |
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Term
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Definition
| Current Assets - Current Liabilities |
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Term
Working Capital or Gross Working Capital |
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Definition
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Term
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Definition
Continual flow of resources through the Working Capital Accounts - Less AR reduces need for cash
- Less inventory reduces need for cash
- AP is an interest-free loan
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Term
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Definition
Treasury Bills CDs Money Market Accounts |
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