business chapter 19 - efficiency ratio analysis

finance chapter 6

bankruptcy

legal process declared by the courts that occurs when an individual or business entity is unable to repay its debts

credit control

ability of a business to collect its debts within a suitable timeframe

creditor days ratio

efficiency 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, ratios are a measure of the financial stability of the business

debtor days ratio

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

gearing ratio

meausres % of an organisations capital employed that comes from external sources

insolvency

financial state where an individual or business entity is unable to pay its debts on time

liquidity

how easily an asset can be turned into cash, high liquid assets are those can be converted into cash easily

profit quality

ability of a business to earn profit in the foreseeable future, business with good profit quality is able to earn profit in the long run

stock turnover ratio

measures no. of times a business sells its stocks within a year, can also be expressed as average number of days it takes for a business to sell all of its inventory