INTERNATIONAL TRADE FINANCE

14-09-16 cheapnisha 0 comment

INTERNATIONAL TRADE FINANCE 

Activity ratios:

Days in inventory ratio reveals efficiency in the management of inventory. Days are expected to be higher here, which is not a good sign to the company.

Inventory turnover shows the inventory turns number on yearly basis. Expected to be higher here, this is not a good sign to the company.

Average collection period reveals the average span of time a company waits for sale proceeds. The period 88 days on average here is shorter one, which is favorable for the company.

The total asset’s turnover ratio of 1.2 is revealing that each $1 asset of the company is generating about $1.2 of sales.

Liquidity Ratios:

Current ratio reveals an entity’s capability of paying current liabilities utilizing the assets which are convertible to cash in a shorter time period. The ratio of 1.39 is showing that the company has $1.39 of current assets to pay the current liability of every $1.

Quick ratio reveals an entity’s capability of paying current liabilities through utilizing its quick assets. The ratio of 0.69 is showing that the company has $0.69 of current assets to pay the current liability of every $1.

Working capital ratio is showing that the company has $2.10 Million current assets in excess of its current liabilities.

  1. Amount to be paid to suppliers:

The formula for calculating the Days payable outstanding (DPO) is;

Days payable outstanding = (average accounts payable / cost of goods sold) * 365 days

Days payable outstanding = 1.8 / 8.19 * 365

Days payable outstanding = 80 Days

Therefore the current day’s payable outstanding of the company is 80 Days.

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