Group B - 6/30/20 Ø Inventory turnover= Cost of Goods Sold/Inventory Cost of Goods Sold (Revenue- Gross Profit)= 4,524,000,000 10,295,000,000 5,771,000,000 Revenue Gross Profit= Inventory= 4,265,000,000 Inventory turnover= 1.06 Ø Receivables turnover= Sales/Accounts Receivable Sales= 10,295,000,000 3,465,000,000 Accounts Receivable= Receivables Turnover= 2.97 Ø Days' sales in receivables= 365 days/Receivables Turnover Days= 365 Receivables Turnover= 2.97 Days' sales in receivables= 122.85 Ø Total asset turnover= Sales/Total Assets Sales= 10,295,000,000 225,448,000,000 Total Assets= Total asset turnover= 0.05
Please help me evaluate these financial ratios to identify any trends or issues and potential reasons for them. Could Covid have played a role?
Please help me interpret the ratios in Group B from managements perspective from period 12/31/19 & 6/30/20
The inventory turnover ratio indicates the speed of converting the stock into sales.
Generally, a high inventory turnover ratio is preferred as it indicates that stock is converted into sales speedy.
On 12/31/2019 Inventory turnover ratio is 1.22 whereas it is 1.06 on 6/30/2020
Inventory turnover ratio decreases in the current period which states that due to Covid inventory is converted into sales slowly as compared to the previous year.
The receivable turnover ratio indicates the relationship between credit sales and Accounts receivables.
The higher receivable turnover ratio indicates that the company has a better credit policy whereas a low ratio indicates that the company suffers problems in the collection of Debts.
On 12/31/2019 Receivable turnover ratio is 3.30 whereas it is 2.97 on 6/30/2020
The receivable turnover ratio decreases in the current period which states that due to Covid the company faces difficulties in collecting the debts from their accounts receivables.
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