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Efficiency ratios - short answer questions


Question 1

Explain why the 'cost of sales' is used to determine stock turnover.

Question 2

Describe why a high stock turnover is considered to be a good thing.

Question 3

Define the term 'bad debt'. Explain how the recognition of bad debts will affect the debtors days ratio for a firm.

Question 4

Explain why a high debtor days' ratio figure is considered a bad thing for a company.

Question 5

'Ratios are symptoms of a situation'. Discuss.