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Asset Turnover Ratio - Doc

Added on - 17 Jun 2021

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The standards set for the salary and wages was 13.04%. In the year 2016-17, salary andwages was amounting to 12.7% whereas in the year 2017-18, the same was 10%. There wasa declination in salary and wages by 2.7% due to increment in the total turnover. Due to theincrement in the total revenue of pharmacy’s, the gross margin has decreased. The reasonfor the boost in the sales was mainly due to pharmacy swelling its team fellows (i.e. 2016-17= $ 460, 769 and 2017-18 = $ 506, 846).The standards set for staff training was 0.9% and for the marketing expense it was 0.55%. Inthe year 2016-17, the ratio for staff training was 0.5% and for marketing expenses the ratiowas 1.47% and in the year 2017-18, the ratio for staff training was 0.42% and for marketingexpenses the ratio was 1.17%. Both the ratios have decreased in 2017-18. These ratiosshould be at least kept at the same level with that of the previous year (2016-17) becausethese are most significant constituents for the boost in the profit margins. The marketingexpenses and the training of staff are the most important to the pharmacy business.Monetary PresentationAsset Turnover RatioThe asset turnover ratio was 2.78 which simply indicates that the turnover rise by $2.78,with the expenditure of $1 on asset. This means that the company is producing gains withthe amount that has been invested in the asset.Gross margin returns on inventory investmentsThe standards set for GMROII was 4.49. In 2016-17, the GMROII was 3.91% whereas in 2017-18, it was 3.65%. The method for the increment in GMROII is to reduce stock or to increasethe profit.Operational EffectivenessInventory Turnover RatioThe standards set for Stock turnover ratio was 7.35 days. In 2016-17, the stock turnoverratio was 9.12 days whereas in 2017-18 the ratio was 14.59 days. This simply directs thatstock management is very pitiable from the pharmacy. The reason for the unfortunate stockmanagement is wholesale buying of stuffs at an economy price.Account Receivable Turnover RatioIn 2017-18, the account receivable turnover ratio is 5.57 which means average days for acustomer to pay their debts is 65.6 days (365/5.57). This simply directs that the customertakes 66 days to pay off their debts which is not a best condition and it needs theconsideration because it slows down the cash flows. Also an interest rate of 5% is charged ifthe debts not paid within 28 days from the transaction date.Monetary Firmness
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