Maximum Stock Level, Cash Turnover, Optimum Cash Level class is for the HSC candidates or for the students of classes 11 and 12. This class is a part of HSC (11-12) [ এইচএসসি (১১-১২) ], Finance and Banking 1st paper. You can find it in the Finance 1st Paper, chapter 5, the topic name is “Maximum Stock Level, Cash Turnover, Optimum Cash Level”. This class will help you in your upcoming HSC examination.
Maximum Stock Level
A maximum stock level is the upper limit of stock that should not be exceeded under normal circumstances without the prior agreement of the management.
The aim of setting a maximum stock level is to avoid undue investment of capital leading to loss of interest, obsolescence of materials, and additional overheads in the form of higher rents.
Main Factors Involved in Fixing the Maximum Stock Level
The main factors to consider when fixing the maximum stock level are:
- Average rate of consumption of materials
- Time needed to obtain new supplies
- Amount of obsolescence available
- Availability of storage space
- Economic order quantity
- Cost of carrying inventory or cost of storage
- Risk of deterioration in quality and obsolescence of materials
- Seasonal considerations in terms of price and availability of materials
- Incidence of insurance costs, which may be important for costly materials
- Inherent risks associated with materials and any restrictions imposed by the government in this regard
Cash Turnover
For business owners, efficiency is everything, particularly in today’s economy. But how is the efficiency of a business’s financial processes accurately measured? One of the best ways to do so is by calculating your cash turnover ratio.
The cash turnover ratio highlights a company’s efficiency and can even provide a glimpse into overall profitability. To find your ratio, you’ll need your business’s accounting data and sales revenue handy. But before diving straight into the cash turnover ratio formula, let’s first explore what this metric means and what it can tell you about your business.
What Is Cash Turnover Ratio?
The cash turnover ratio is a formula that assesses how well a company turns its cash balances into sales revenue during a certain period of time. The solution to the formula is expressed as a number that represents how many times a company’s average cash balance is used to generate revenue during a given period, which is typically one year.
What Is a “Good” Cash Turnover Ratio?
As with most financial measures, it is unreasonable to quantify what the average business should aim for when it comes to this ratio. Factors such as a business’s age, industry, size, location, and financial goals make it so that each business will have a ratio that they should aim for. This is why it’s vital to make a habit of calculating this ratio, because you can then compare your existing ratio to that of previous fiscal years, and hopefully see an upward trend!
While there is no benchmark number that signals a “good” turnover ratio, generally speaking, the higher the better, as that indicates increased efficiency and profitability. However, a higher ratio could also indicate that you are burning through cash too quickly, which could reveal other cash flow management issues. Looking at this particular financial measure alongside other key business metrics can give you a more holistic picture of company performance.
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