Efficiency Ratios Explained | Trade Receivable Day, Trade Payable Days, and Inventory Turnover.

Efficiency ratios are used to measure how efficiently a business uses its current assets and its current liabilities.

The three key efficiency ratios used by businesses are trade receivable days, trade payable days, and Inventory turnover.

Watch this video to see what each one of these efficiency ratios means for a business and how they are calculated!

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[julesy]

Just brilliant and perfect timing @Two Teachers as I am literally teaching this exact topic to my post 16 students this week 👌🏽😄👏🏽

[kingtigercrownestate]

If you are a business that wants to get paid what another business owes you then you DON'T want that business holding onto it's cash for as long as it can and another business doesn't want you doing that either so the rule of getting paid as fast as possible and paying out as slowly as possible DOESN'T WORK when businesses owe each other money the rules of thumb cancel each other out.

If your business is holding onto owed money as long as possible that cancels out another business having a low trade receivable amount of days and if a business that owes you money is holding onto that money for as long as possible then that cancels out your trade receivable days being low as possible two businesses cannot be doing both at the same time one ALWAYS cancels out the other.