# All financial ratios and data compiled in the template.

Builder – 3

Accounts Receivable Turnover: it is ratio to measure of financial values that how effectively company is collecting the revenues and how efficiently it is using its assets. Sometimes it is known as debtor’s turnover ratio.

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In this ration, the accounts receivable turnover ration measures the number of times over a given period that a company collects its average accounts receivable. we can calculate it by using the below formula –

Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable

Example based on the Microsoft balance sheet-

Example based on the Apple balance sheet from the Builder assignment template-

Conclusion- as we can see that both the companies have a different ratio where the Microsoft is good compare to the apple in account receivable ratio measurement.

Days’ Sales in Receivables: Days sales receivables is a measure of the average number of days that it takes a company to collect payment for a sale. It is often determined on a monthly, quarterly, or annual basis it’s depend upon the company payment terms and conditions and their rules. In other hands it is also known as a Day sales outstanding (DSO)

Generally speaking, higher DSO ratio can indicate a customer base with credit problems and/or a company that is deficient in its collection’s activity. A low ratio may indicate the firm’s credit policy is too rigorous, which may be hampering sales. In other hands, if I explain it then A high DSO number shows that a company is selling its product to customers on credit and waiting a long time to collect the money. This can lead to cash flow problems.

We can calculate the day sales outstanding based on the below formula-

DSO ratio = accounts receivable / average sales per day, or

DSO ratio = accounts receivable / (annual sales / 365 days)

Example based on the Microsoft balance sheet-

Example based on the Apple balance sheet from the Builder assignment template-

Conclusion- As we can see with both companies’ statics and number where apple has a little bad score compare to the Microsoft which conclude that apple is selling its product majorly on credit basis.

Accounts Payable Turnover: The accounts payable turnover ratio is a short-term liquidity measure used to quantify the rate at which a company pays off its suppliers. Accounts payable turnover shows how many times a company pays off its accounts payable during a period. It is also known as AP (account payable) in short terms.

A high accounts payable ratio signals that a company is paying its creditors and suppliers quickly, while a low ratio suggests the business is slower in paying its bills. This is a critical metric to track because if a company’s accounts payable turnover ratio declines from one accounting period to another, it could signal trouble and result in lower lines of credit.

We can calculate the Accounts payable based on the below formula-

AP ration=Net credit purchases/Average Accounts payable

• Example based on the Microsoft balance sheet-
• Example based on the Apple balance sheet from the Builder assignment template-

Conclusion- as per both companies balance sheet and their AP ratio which stats that Microsoft takes much time compare to apple to clear the dues for their creditors in terms of payment or cash flows.

Payable Turnover in Days: The accounts payable turnover ratio, also known as the payable’s turnover or the creditor’s turnover ratio, is a liquidity ratio that measures the average number of times a company pays its creditors over an accounting period.

The ratio is a measure of short-term liquidity, with a higher payable turnover ratio being more favorable. we can calculate the accounts payable turnover in days, simply divide 365 days by the payable turnover ratio by below formula-

Payable Turnover in Days = 365 / Payable Turnover Ratio

• Example based on the Microsoft balance sheet-
• Example based on the Apple balance sheet from the Builder assignment template-

Conclusion- while compared to both the companies from the builder examples, it shows that apple takes a much time rather than Microsoft to pay the suppliers payments.

Inventory Turnover: Inventory turnover is a financial ratio showing how many times a company has sold and replaced inventory during a given period.

A company can then divide the days in the period by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. Calculating inventory turnover helps businesses make better pricing, manufacturing, marketing, and purchasing decisions.

We can calculate the Inventory turnover based on this below formula-

​Inventory Turnover=COGS/Average Value of Inventory

• Example based on the Microsoft balance sheet-
• Example based on the Apple balance sheet from the Builder assignment template-

Conclusion- based on the inventory turnover from above calculations for Microsoft and the apple companies it shows that Microsoft has better scores to apple to clean or selling up the inventory over the annual performance.

Days’ Sales in Inventory: Days Sales in Inventory (DSI), sometimes known as inventory days or days in inventory, is a measurement of the average number of days or time required for a business to convert its inventory into sales.

In addition, goods that are considered a “work in progress” (WIP) are included in the inventory for calculation purposes

The days sales of inventory (DSI) is a financial ratio that indicates the average time in days that a company takes to turn its inventory, including goods that are a work in progress, into sales.

We can calculate the Inventory turnover based on this below formula-

Formula: DSI = (Inventory / Cost of Sales) x (No. of Days in the Period)

so before calculating the DSI, we have to find the inventory details turnover or inventory details by following the upper formula, here I am taking example from the builder sheet which shows the stats for the two different companies –

• Example based on the Microsoft balance sheet-

Another example for the apple company as below-

• Apple example form builder sheet template-

Conclusion: if we see the stats for both organizations, the number shows that Microsoft is better then apple to sales of Inventory (DSI) in whole year performance.

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