Business M 3.6 Efficiency ratios HL

Bankruptcy

legal process declared by courts when individual or business can no longer repay their debts

Credit control

ability of abusiness to collects its debts within a suitable timeframe

Creditor days ratio

efiiciency ratio that measures the average number of days it takes for a business to pay its creditors

debt and equity ratios

enable a business to calculate the value of their liabilities and debts against their equity. measure of the financial stability of the business.

equity

in a business is the portion of the company that is truly owned by its stakeholders, calculated as total assets minus total liabilities

debtor days ratio

measures the average number of days it takes for a business to collect the money owed from debtors

gearing ratio

measure the percentage of an orgranizations capital employed that comes from external sources

insolvency

financial state when debts cannot be paid ontime —> can lead to bankruptcy if there is no solution

liquidity

how easily asset can be turned into cash

Profit quality

ability of a business to earn profit in the foreseeable future. when a business has good profit quality they can earn profit in the long run

stock turnover ratio

measures the number of times a business sells its stocks within a year. It can also be expressed as the average number of days it takes for a business to sell all of its inventory.