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Debtors' days > Debtors' days - Pg. 41

AnAlySIS AnD FInAnCIAl RATIoS 41 The stock-turnover ratio is just a simple measure of how quickly stock moves and a high stock-turnover number would generally be considered healthy since fewer funds were being tied up in stock. Be aware that stock-turnover ratios calculated using year-end figures can be concealing significant movements during the accounting period. In other words, the year-end value of stock may not reflect average stock values. This consideration also applies to other ratios that have been calculated using year-end values. The calculation for stock turn- over usually uses average stock values. Stock turnover = Cost of sales (material costs only) Average stock values The average stock value can be calculated in the case of X Ltd by using the opening and closing values of stock and dividing them by 2. Average stock = 200 + 250 2 Average stock = 225