Question

Asset management ratios are important - firms need to manage assets efficiently because capital obtained to acquire those assets is expensive. These ratios include the: (1) Inventory turnover ratio, (2) Days sales outstanding, (3) Fixed assets turnover, and (4) Total assets turnover. The inventory turnover ratio indicates how many times during the year inventory is -Select- and restocked. Its equation is: Excess inventory is unproductive and represents an investment with a -Select- rate of return. An alternative definition of the inventory turnover ratio replaces sales in the numerator with -Select- . The rationale for this measurement is that inventory is carried at cost, so sales in the numerator overstates the true inventory turnover ratio. The days sales outstanding (DSO) ratio is also called the average collection period (ACP). Its equation is:

Answer 1

Throughout the overview section following table, the definition including its instance supplied is defined.

Step-by-step explanation:

• The asset turnover ratio reflects how much inventory is consumed and restocked throughout the year.
• Excess inventory becomes counterproductive and constitutes a low-return investment. An alternate interpretation including its inventory turnover ratio substitutes the cost of products delivered towards revenue in the numerator.
• Compared to the conditions around which the company prices its products, the DSO may even be measured. This will suggest a need to step up the accumulation of receivables unless the pattern has been growing and credit policy just hasn't improved.
• Because of age, there may be issues understanding this calculation, specifically whenever an older organization in comparison to something like a newer business.