Using ratios to analyse companies

1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20   

10. Payment of trade creditors

Definition: Trade creditors divided by sales, multiplied by 365

Significance:

This is the flip side of the trade debtors calculation. It shows how many days credit the company gets, on average, from its suppliers.

Example

This is actually quite quick. Lots of large companies use their powerful position to put the squeeze on suppliers by holding on to cash as long as possible.

Yardstick:

No fixed yardsticks here.

1. Why bother with ratios? 2. A word of warning 3. The P&L and the balance sheet 4. Grouping the ratios 5. Profit margin 6. Return on capital employed (ROCE) 7. Sales as a multiple of capital employed 8. Stockturn 9. Debt collection 10. Payment of trade creditors 11. Cash-to-cash cycle 12. Gearing 13. Interest cover 14. Current ratio 15. Quick ratio (acid test) 16. Earnings ratios 17. Dividend ratios 18. Other ratios 19. Sources of information 20. Conclusion

• Magic Numbers