Ratio

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March 4, 2017 at 10:09 am #375457
hemraj123
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Sir, In exam for ratios like inventory turnover period, receivables collections period and payables payment period, should we take the average figure or the year end figure for inventory, receivables and payables?

Thanks
March 4, 2017 at 11:32 am #375495
MikeLittle
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For receivables and for payables we take the year end figure

For inventory we normally take the average of (opening + closing inventory) / 2 (which is a stupid basis, but it’s the only way we can arrive at some sort of average!)
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