The concept of inventory turnover refers to a quantitative measure that assesses the frequency with which a corporation sells its complete inventory within a specific accounting period. It is calculated by comparing product cost to the average inventory value during that period (Kenton, 2021). The computation of this metric involves the division of the cost of goods sold by the average inventory. A high asset turnover ratio indicates that a corporation effectively utilizes its assets. Additionally, if the corporation possesses a low ratio, it signifies that the utilization of assets is occurring, yet there may be a requirement for enhanced efficiency. The utilization of the inventory turnover ratio is crucial for companies as it enables them to assess the efficacy with which the company produces sales from its inventory. Once again, the process of estimating and monitoring inventory turnover enables firms to make informed decisions in multiple domains, such as pricing strategies, manufacturing operations, marketing campaigns, procurement activities, and warehouse management. Therefore, inventory turnover is a crucial metric for businesses. The receivable turnover is a metric used to assess the efficiency with which a company collects its credit sales, specifically those transactions where payment is deferred until after the sale. According to Murphy (2023), a correlation has been observed between a low proportion of receivables to sales and a high turnover rate. This metric's computation involves dividing a company's net credit sales by its average accounts receivable. A higher accounts receivables turnover ratio indicates that a company exhibits greater efficiency than its competitors in collecting accounts receivable. For instance, when a company's receivable turnover ratio is 5, it signifies that it successfully retrieved its outstanding receivables on five occasions during the specified timeframe. A receivable turnover ratio's primary objective is to assess an organization's effectiveness in collecting outstanding debts and managing credit extensions. Consequently, the utilization of a receivable turnover ratio holds significant importance within the realm of commercial operations. References: Murphy, C. B. (2023, May 24). Receivables Turnover Ratio Defined: Formula, Importance, Examples, Limitations. Investopedia. Retrieved September 14, 2023, from https://www.investopedia.com/terms/r/receivableturnoverratio.asp Kenton, W. (2021, May 7). Efficiency Ratio: Definition, Formula, and Example. Investopedia. Retrieved September 14, 2023, from https://www.investopedia.com/terms/e/efficiencyratio.asp#:~:text=Som
e%20common%20efficiency%20ratios%20are,sales%20and%20stock %20turnover%20ratio . 360 words
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