KiranZahera Sirajali Sumarani 0739171 International Trade Finance 230-001 Efficiency Ratio Assignment 1. Days sales of inventory: Formula: (Inventory / COGS) x 365 $ (5,936,000,000 / 124,940,000,000) x 365 = 17.34 days It indicates the average days an organization takes to turn its inventory including work in progress inventory into sales. Lower number of days indicates that the company is efficient in clearing its inventory. 17.34 days will be considered very good for the company. 2. Days sales outstanding: Formula: (Accounts Receivable/ Net credit sales) x 365 $ (14,104,000,000/ 0) x 365 = 0 days It indicates the number of days a company takes to receive payment of a sale. The company's days sales outstanding is 0 that shows that the company's cash flow is ideal. 3. Days payable outstanding: Formula: (Accounts payable/ COGS) x 365 $ (38,489,000,000/124,940,000,000) x 365 = 112.44 days It indicates that how many days it takes for the company to pay its invoices. 112.44 days is a large number and the company should pay its invoices on time. It's bad for the company since suppliers would like to do business with a company that takes less days to pay. 4. Cash conversion Cycle: Formula: DSI + DSO - DPO 17.34+ 0 - 112.44 = (95.1) It indicates how fast a company converts its cash into inventory and accounts payable, and then through sales and accounts receivable and then into cash. Here CCC is negative, that means company needs less time to sell its inventory and collects cash compared to time it takes to pay its suppliers. A negative CCC is sometimes considered bad as customers and suppliers prefer to do business with a company that has a positive CCC.