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Financial efficiency ratios - examples


Supermarkets v fine art galleries

These very different industries will have very different ratios. Supermarkets sell a lot of goods cheaply and very quickly; fine art galleries sell a small number of goods infrequently for a high price. There is little credit in the supermarket, but that may not be the case with fine art. The result:

Supermarket Fine art gallery
Asset turnover Very high Low
Stock turnover Very high Low
Debtor days Very low High

A supermarket will typically sell its stock on average every 2 weeks; have debtor days of about 2, but creditor days of about 40/50. Think about it, great for CASH FLOW.