Quick Question - Formal finance street name?
What is the formal finance street name for the following?:
Accts. Rec./Sales Accts. Pay/Sales Inventory/Sales
I think they are called ---turnover, with the numerator as the -----, but I just want to know if this is correct.
turnover has the ___ in the denom not the num sales or cogs would go in the num
For your reference, AP and inventory are never taken as a percent of sales -- it would be a percent of cost of goods sold.
Relevant metrics are
AR / (Sales / 360) = AR Days Outstanding AP / (COGS / 360) = AP Days Outstanding COGS / Inventory = Inventory Turns
Agreed. Inventory days are also used though.
What's up with the 360 though vs 365? Is that some convention I missed out on?
If you're doing it yearly, 365. But it's pretty rare to show a model with JUST years -- usually it'll be at least quarterly, sometimes monthly. In which case you'll do 30 days per month or 90 days per quarter, which yields the 360 days per year convention.
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