Turnover Ratios Analysis for Gillette PPT

This PPT slide, part of the 48-slide Financial Ratio Analysis PowerPoint presentation, presents a detailed analysis of various turnover ratios for Gillette, derived from data in their 1996 Annual Report. It includes calculations for receivables turnover, inventory turnover, payables turnover, and asset turnover, each essential for evaluating operational efficiency.

The receivables turnover ratio is calculated using credit sales in the period divided by the average accounts receivable balance, resulting in a ratio of 3.87, which translates to an average collection period of 94 days. This indicates the time it takes for Gillette to collect payments from its customers, providing insight into cash flow management.

Next, the inventory turnover ratio, derived from the cost of goods sold divided by the average inventory, shows a ratio of 2.80, equating to an inventory holding period of 130 days. This suggests how effectively Gillette is managing its inventory levels, which is critical for minimizing holding costs and ensuring product availability.

The payables turnover ratio, calculated from purchases on account divided by average accounts payable, results in a ratio of 7.04, or an average payment period of 52 days. This reflects how quickly Gillette pays its suppliers, which can impact supplier relationships and cash flow.

Lastly, the asset turnover ratio, calculated from sales in the period divided by average assets, stands at 1.00, indicating that Gillette generates one dollar of sales for every dollar of assets. This metric is vital for assessing how efficiently the company utilizes its assets to generate revenue.

Overall, these ratios provide a comprehensive view of Gillette's operational efficiency and financial health, making this analysis a valuable resource for stakeholders considering the company's performance.

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