The number of days it takes to pay suppliers. A standard ratio. Indicates reliance on credit from suppliers. May understate the amount of trade credit available, if the firm is paying faster than necessary to qualify for discounts. The number of times per period current assets net of current liabilities converts to cash.
Combines accounts receivable, inventory and accounts payable turnover.
The book value of current assets may be less than their market value due to unsellable inventory or uncollectable accounts receivable. May understate the amount of trade credit available, if the firm is paying faster than necessary to qualify for discounts. The amount of sales generated by the firm's investment in fixed assets. Use in industries with a large proportion of property, plant and equipment to total assets. Book value of net fixed assets may not reflect their market value or replacement cost.