How to Analyze the Accounts Receivable Turnover Ratio

The Accounts Receivable Turnover ratio (AR T/O ratio) is an accounting measure of effectiveness. It is also known as the Debtor’s Turnover ratio, and we use it to gauge how effectively the company manages credits they extend to customers and collection. We calculate the ratio by dividing net sales over the average accounts receivable for […]

Working Capital Analysis

Introduction Most significant new projects for a business require investments in Working Capital, and this harms a company’s cash flow. Proper cash management is essential if we want the company to continue to operate in the future. A business can be profitable, but if it can’t keep cash on hand, it won’t survive. Therefore it […]

Cash Conversion Cycle Analysis

What is the Cash Conversion Cycle The Cash Conversion Cycle is a metric that tells us how long it takes the company to convert capital invested in inventory back to cash. Here’s a cool-looking process diagram to illustrate the cash conversion cycle: Elements of the Cash Conversion Cycle The Cash Conversion Cycle is a combination […]