![]() The fixed assets turnover ratio measures how effectively the firm uses its plant and equipment. If its trend has been rising and _ policy has not changed, this would indicate a need to speed up the collection of receivables. Its equation is: DSO= Days sales outstanding= Receivables/Average sales per day= Receivables/Annual Sales/365 The DSO can also be evaluated by comparison with the terms on which the firm _ its goods. The days sales outstanding (DSO) ratio is also called the average collection period (ACP). The rationale for this measurement is that inventory is carried at cost, so sales in the numerator overstates the true inventory turnover ratio. ![]() An alternative definition of the inventory turnover ratio replaces sales in the numerator with _. Its equation is: Inventory Turnover Ratio = Sales/ Inventories Excess inventory is unproductive and represents an investment with a _ rate of return. ![]() The inventory turnover ratio indicates how many times during the year inventory is _ and restocked. These ratios include the: (1) Inventory turnover ratio, (2) Days sales outstanding, (3) Fixed assets turnover, and (4) Total assets turnover. Asset Management Ratios Asset management ratios are important - firms need to manage assets efficiently because capital obtained to acquire those assets is expensive.
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