X days 5. Number of days' sales in receivables х 6. Inventory turnover X days 7. Number of days' sales in inventory х 8. Ratio of fixed assets to long-term liabilities
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Days of sales in receivables tells us the average collection period it took for the company to collect cash from the receivables of the company.
It is calculated as:
Number of Day's sales in receivable = 365/Accounts receivable turnover ratio
Inventory Turnover is defined as the total number of times the company has"turned" Inventory over ie sold inventory over the course of the period.
It is calculated as:
Inventory turnover ratio = Cost of Goods Sold/Average Inventory
where Average Invetnory = (Current year Inventory + Previous Year Inventory)/2
Number of day's sales in inventory indicates the number of days it took to sell inventory by the company
It is calculated as
Number of Day's sales in inventory= 365/Inventory turnover ratio
Ratio of fixed assets to long term liabilities = Fixed Assets/Long term Liabilities
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