Role of Financial Indicators

In: Business and Management

Submitted By subhanqureshi
Words 973
Pages 4
ROLE OF FINANCIAL INDICATORS (RATIOS) IN THE MONITORING OF BUSINESS PERFORMANCE

CONTENTS

1. Introduction …………. Page 3

2. Cash Operating Cycle …………. Page 3

2.1 Figure of Cash Operating Cycle …………. Page 3

2.2 Financial Indicators (Ratios) …………. Page 4

2.3 Stock Turnover …………. Page 4

2.4 Debtor Turnover …………. Page 4

2.5 Creditor Turnover …………. Page 5

2.6 Find the Number of Turnover days …………. Page 5

2.7 Example …………. Page 5

2.7.a Calculation of Stock Turnover according to formula …………. Page 6

2.7.b Calculation of Debtors Turnover according to formula …………. Page 6

2.7.c Calculation of Creditors Turnover according to formula …………. Page 6

2.7.d Cash Operating Cycle period in days …………. Page 7

3. Conclusion …………. Page 7

1. Introduction

When we begin our discussion on the role of financial indicators (ratios) in the monitoring of business performance, its means we discuss cash operating cycle. Cash operating cycle contains the elements of working capital which shows company`s financial position ie how the company earns profit and loss at the starting and ending of financial year.

2. Cash Operating Cycle

The cash operating cycle summarizes the various statistics of cash flow and calculates the changes in cash position during financial year. The figure 2.1 shows the elements of Cash Operating Cycle.

2.1 Figure

The analysis of figure 2.1: We can state that the cash operating cycle operates the activities of Stock turnover, Cash receipts from debtors or customers and cash payments to creditors or suppliers. 2. FINANCIAL INDICATORS (RATIOS)

• STOCK TURNOVER • DEBTORS TURNOVER • CREDITOR TURNOVER

2.3 STOCK TURNOVER

Stock turnover measures company`s business efficiency shown during the year how many times company sold…...

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