Name : Nada Gamal Youssef Farag

Group : 5 / English MBA

Task Four : Calculate the efficiency ratios in the year 2020 with your comments

Solution :
1. Average inventories turnover period = Average inventories held
_________________________ x 365
Cost of sales

= 40.7 days

2. Average settlement period for trade receivables = Trade receivables

__________________ x 365
Credit sales revenue

= 36.5 days

3. Average settlement period for trade payables = Trade payables

_________________ x 365
Credit purchases

= 36.6 days

4. Sales revenue to capital employed ratio = sales revenue

_______________________________________
Share capital+ reserves+ Non-current liabilities

= 2.55 times

5. Sales revenue per employee = Sales revenue

_______________
No. of employees

= $ 0.28
 Settlement period for trade receivables Settlement period for trade payables
2019 43.8 41.7
2020 36.5 36.6

Comment:
- The average settlement period for trade receivables was 43.8 days in the operational year 2019
which is a higher period compared to year 2020 ( 36.5 days ). Lower period is better (36.5 days)
to ensure an efficient payment collection system and avoid liquidity problems.
- The average settlement period for trade payables was 41.7 days in the operational year 2019
which is a higher period compared to year 2020 ( 36.6 days ). Higher period is preferred ( 41.7
days ) as it presents an opportunity to utilize free credit.

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