Turnover Ratios

1) Inventory Turnover Ratio

Inventory Turnover Ratio indicates that how fast inventory in an organization is sold. A
high ITR ratio is good from the viewpoint of liquidity of the organization and vice versa. A low
ratio implies that inventory does not sell fast and stays on the shelf or in the warehouse for a
comparatively long time.

Inventory Turnover Ratio = Cost Of Goods Sold

Average Inventory

Year COGS Avg Inventory Inventor Turnover

(Rs. In Crores) (Rs. In Crores ) Ratio
2017-18 173371.19 42137.63 4.671
2018-19 182254.45 39013.73 4114

Ratio increases from 4.114 to 4.671 which implies that there is either strong sales or insufficient
inventory , sometimes a low inventory turnover rate is a good to have.

2) Current Assets Turnover Ratio

The asset turnover ratio is an efficiency ratio that measures a company’s ability to
generate sales from its assets by comparing net sales with average total assets. In other words,
this ratio shows how efficiently a company can use its assets to generate sales.
This ratio measures how efficiently a firm uses its assets to generate sales, so a higher ratio is
always more favorable. Higher turnover ratios mean the company is using its assets more
efficiently. Lower ratios mean that the company isn’t using its assets efficiently and most likely
have management or production problems.
Year Sales Avg Current Asset Inventory Turnover
(In Crores) (In Crores) Ratio
2017-18 289386.25 13572.84 2.1282
2018-19 299190.59 123431.16 2.423

The increasing Current Asset ratio implies that the company is efficiently using its asset to
generate sales.

3) Debtors Turnover Ratio

This ratio indicates the number of times the receivable are turned over in a year in relation
to sales. It shows, how quickly receivables are converted into cash and cash equivalents and thus,
shows the efficiency in collection of amounts due debtors. The high the ratio is better since it
indicates that debts are collected more promptly.A low ratio shows inefficiency in collection and
more investment in debtors than required.
Debtors Turnover Ratio = Sales
Average Debtors

Year Sales Avg Inventory Inventory Turnover

(In Crores) (Rs. In ) Ratio
2018-19 289386.25 19893.30 14.54
2017-18 299190.59 18996.17 15.75

From 14.54 (2017-18) turnover of receivable increased by 15.75 (2018-19) it indicate that the
company is more effectively processing credit .