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3.6 Efficiency ratio analysis
IB Business and Management
6
Business
12th Grade
10/21/2015
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Term
What are the four efficiency ratios?
 Definition
Stock turnover ratio
Debtor days
Creditor days
Gearing ratio
Term
Formula for stock turnover ratio
 Definition
COGS/inventory level
Term
Formula for debtor days
 Definition
revenue/debtors
Term
formula for creditor days
 Definition
(trade creditors/credit purchases) times 365
Term
gearing ratio
 Definition
(long term loans/capital employed) times 100
Term
limitations of ratio analysis
 Definition
-a ratio on its own isn't very helpful
-companies calculate differently
-do not solve business problems
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