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Number of Day's Sales in Inventory (Inventory/Cost of Goods Sales) X 365

1) The company's inventory turnover ratio increased from 3.09 in 2015 to 3.34 in 2017, indicating better inventory management. The number of days sales in inventory decreased from 118 days to 109 days over this period. 2) The company's accounts receivable turnover ratio decreased from 5.42 in 2015 to 5.97 in 2017, while the number of days sales in receivables decreased from 67 days to 61 days. 3) The company's fixed asset turnover ratio increased from 3.55 in 2015 to 3.81 in 2017, showing higher returns on fixed asset investments. 4) The company's total asset turnover ratio decreased from 1.05 in 2015 to 1.01 in

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81 views6 pages

Number of Day's Sales in Inventory (Inventory/Cost of Goods Sales) X 365

1) The company's inventory turnover ratio increased from 3.09 in 2015 to 3.34 in 2017, indicating better inventory management. The number of days sales in inventory decreased from 118 days to 109 days over this period. 2) The company's accounts receivable turnover ratio decreased from 5.42 in 2015 to 5.97 in 2017, while the number of days sales in receivables decreased from 67 days to 61 days. 3) The company's fixed asset turnover ratio increased from 3.55 in 2015 to 3.81 in 2017, showing higher returns on fixed asset investments. 4) The company's total asset turnover ratio decreased from 1.05 in 2015 to 1.01 in

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Thảo

1) Inventory Turnover and Number of Day’s Sales in Inventory:

Formula: Inventory turnover= Cost of Goods Sold ÷ Average Inventory or Sales

Number of Day's Sales in Inventory= (Inventory/Cost of Goods Sales) x 365

Year 2015 2016 2017


Inventory 639.32 732.861 633.808
Cost of Goods Sales 2,194.89 2,070.06 2,279.64
Inventory turnover 3.09 3.02 3.34
Number of Day's Sales in Inventory 118.07 120.97 109.41
Inventory turnover is an efficiency ratio which calculates the number of times per period a
business sells and replaces its entire batch of inventories. There was a significant decrease in the
times of inventory turnover ratio between 2015 and 2016, from about 2.32 to 3.09. After that, the
inventory turnover was rising constantly during the next year, this number reached
approximately 3.34 in 2017 which means the inventory was managed better than ever, shows that
high inventory turnover ratios indicate the company is enjoying strong sales. The number of
Day's Sales in inventory measure of a company's performance that gives investors an idea of
how long it takes a company to turn its inventory (including goods that are a work in progress, if
applicable) into sales. Comparing with the inventory turnover, it is obvious that the time of DHG
spends for turning over the entire inventory is decreasing gradually over 3 years. From 2015 and
2017, this figure witnessed a sharp drop, from 120 to 109 days respectively. Combining the data
from above charts, because the significant rise in DHG's sales, the company's inventory days will
fall dramatically, so DHG can maintain its inventory quantities.

2) Account Receivables Turnover and The Number of Day’s Sales in Receivable:

Formula: Account Receivable Turnover= Net credit sales/ Average Account Receivable

Number of Day's Sales in Receivables= (Account Receivable/Total Credit Sales) x number of


days
Year 2015 2016 2017
Net credit Sales 3,607.76 3,783.05 4,062.75
Short-term Receivable 644.064 692.281 799.556
Long-term Receivable _ 5.099 3.509
Accounts Receivable Turnover 5.42 6.34 5.97
Number of Days' Sales in Receivables 67.36 57.58 61.18
The account receivable turnover measures a firm's effectiveness in extending credit and in
collecting debts on that credit. As is presented in above graph, it is clear that DHG's receivable
turnover ratio went up significantly at the beginning at around 5.42 to 6.34 times in 2015 and
2016 respectively before a reduction from 6.34 in 2015 to 5.97 in 2016. Conversely, the
number of Days' Sales in Receivable of this company witnessed a downward trend in one year.
Spending days by DHG began much lower from the top to bottom in the early 2016, from
approximately 67 to 57 days only and then, after falling back to under its original figure, to end
the period as the greater spending time at 61 days. Thus, it is implied that the company is
maintaining customer satisfaction leading to the credit being given to customers that are not
creditworthy.

3) Fixed Asset Turnover:

Formula: Fixed-asset turnover ratio = Net Sales/Average Fixed Asset

Year 2015 2016 2017


Net Sales 3,607.76 3,783.05 4,062.75
Fixed Assets 1,067.77 1,103.43 1,027.00
Fixed asset turnover 3.55 3.49 3.81
The fixed asset turnover ratio is an efficiency ratio that measures a company return on their
investment in property, plant, and equipment by comparing net sales with fixed assets. A glance
at the diagram reveals that in 2017 the DHG's fixed asset turnover was highest, its ratio was 3.81
for every dollar in fixed assets, but before that, the turnover steadily declined from 2015 to 2016
when the ratio was recorded at just 3.49. At the end of the period shown, the there was a sharp
increase in asset turnover reaching to 3.81 which means DHG comparably low investments in
PP&E, rather than an indication of high sales.

4) Total Asset Turnover:

Formula: Total Asset Turnover=Net Sales/Total Asset

Year 2015 2016 2017


Net Sales 3,607.76 3,783.05 4,062.75
Total Asset 3,363.20 3,945.34 4,087.48
Total Asset Turnover 1.05 1.04 1.01
The total asset turnover ratio measures the ability of an organization to efficiently produce
sales, and is typically used by third parties to evaluate the operations of a business. It is evident
from the diagram that the ratio in 2015 was highest while it was lowest in 2017. The greatest
ratio of the total asset turnover was in 2015 reaching to 1.19 which means for every dollar
invested in assets. However, two years later, the figure kept on decreasing and reached to the
lowest level in 2017 with amount of 1.01. This means DHG's ability to control its asset had been
reduction in recent years led by the raising of inventory or average receivable or the decreasing
of sales.

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