Joys Of Compounding: The Passionate Pursuit of Lifelong Learning

by Gautam Baid

Operating Efficiency Analysis Net fixed asset turnover ratio. The higher this ratio is, the better. A high ratio shows that the company sweats its fixed assets in an efficient manner. Receivables days. The lower the number of days, the better. A higher number means that the company is giving customers a longer credit period to generate sales. In case of fictitious sales, in which cash is not received from customers, the number of receivables days will be constantly increasing. Inventory turnover ratio. The higher this ratio is, the better. Lower inventory turnover means that the company is accumulating a lot of inventory (which might become obsolete later).