Question

In week 8, you had to calculate a few ratios: current ratio, quick ratio, days sales in receivables, inventory tunover. What are those formulas?

Answer 1

The formulas for the current ratio, quick ratio, days sales in receivables, and inventory turnover are explained.

Step-by-step explanation:

The formulas for the ratios mentioned are as follows:

1. Current ratio = Current Assets / Current Liabilities

2. Quick ratio = (Current Assets - Inventory) / Current Liabilities

3. Days Sales in Receivables = Accounts Receivable / (Net Credit Sales / 365)

4. Inventory Turnover = Cost of Goods Sold / Average Inventory

These formulas are used to calculate important financial ratios that measure a company's liquidity, efficiency, and collection period. For example, the current ratio helps evaluate a company's ability to pay its short-term obligations, while the inventory turnover ratio measures how quickly a company sells its inventory.