Example: Calculate Common Financial Ratios
Days Sales Outstanding
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Days sales outstanding (DSO) is used to calculate the average collection period. DSO is a financial ratio that illustrates how well a company's accounts receivables are being managed.
Accounts needed include:
Account Name | Account Code | Account Type |
|---|---|---|
Accounts Receivable (Rollup) | AccountsReceivable | Current Asset - cumulative |
Income | Income | Income - periodic |
Calendar Days in Month | CalendarDaysInMonth | Assumption - periodic |
Formula:
DIVF(ACCT.AccountsReceivable,
ACCT.Income)*ASSUM.CalendarDaysInMonth
Days Payable Outstanding
Days payable
outstanding (DPO) is the ratio of payables to the daily average cost of
sales.Accounts needed include:
Account Name | Account Code | Account Type |
|---|---|---|
Accounts Payable (Rollup) | AccountsPayable | Current Liability - cumulative |
Cost of Goods Sold | CostOfGoodsSold | Cost of Goods Sold - periodic |
Calendar Days in Month | CalendarDaysInMonth | Assumption - periodic |
Formula:
DIVF(ACCT.AccountsPayable,
ACCT.CostOfGoodsSold)*ASSUM.CalendarDaysInMonth
Inventory Turnover Ratio
The speed with
which a company can sell inventory is a critical measure of business performance. A low
turnover implies weak sales and, therefore, excess inventory. A high ratio implies
either strong sales and/or large discounts.Accounts needed include:
Account Name | Account Code | Account Type |
|---|---|---|
Cost of Goods Sold | CostOfGoodsSold | Cost of Goods Sold - periodic |
Inventory | Inventory | Current Asset - cumulative |
Formula:
DIVF(ACCT.CostOfGoodsSold,
ACCT.Inventory)