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a)
Year 2
Year 1
Stock turnover
(350/500) * 365 =
255.5 days
(250/450) * 365 =
202.7 days
or
500/350 =
1.43 times
450/250 =
1.8 times
Debtor days
(150/1,000) * 365 =
55 days
(200/850) * 365 =
86 days
Creditor days
(300/500) * 365 =
219 days
(200/450)*365 =
162 days
b) The term 'efficiency position' should be defined. The efficiency position of JKL Ltd. can be judged by assessing the firm's efficiency ratios, i.e. its Stock turnover, creditor days and debtor days:
c) There are three efficiency ratios in this question and hence any development in these should help to get better the overall efficiency position of the firm. Some examples are given below.
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