what kinds of performance improved or deteriorated and explain whether the asset
ID: 2538205 • Letter: W
Question
what kinds of performance improved or deteriorated and explain whether the assets are becoming more or less productive over time.
2018
2017
2016
Days sales outstanding
67
56
61
Days Inventory Outstanding
215
212
193
365 divided by Long-term asset turnover (or 365 divided by PPE turnover)
153
129
130
Is the company becoming better or becoming less efficient?
2018
2017
2016
Days sales outstanding
67
56
61
Days Inventory Outstanding
215
212
193
365 divided by Long-term asset turnover (or 365 divided by PPE turnover)
153
129
130
Explanation / Answer
Days sales outstanding is generally used by companies to estimate their average collection period. Higher the collection period higher will be the chances of bad debts, it also leads sometimes cash crunch in the business as collection is made after long period of time.
Days inventory outstanding states that companies has to incur carrying cost for the inventory tied with them , higher the outstanding period higher will be the cost incurred, huge capital is blocked into the stock.
As per the information all. the figures are higher than the previous year it states that company is becoming less efficient to recover debts, sell its inventory,
Conclusions : company has to change its policy regarding debtor, and investment has to be made in fast moving items in order to incur less carrying cost and less investment has to be made.
Please please upvote it at the end thank you so much
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