IB Business Management 3.6 Efficiency Ratio Analysis Key Definitions

A legal process where an individual or business declares they are unable to repay outstanding debts. This can result in asset liquidation to pay creditors or a structured repayment plan under court supervision.

A financial strategy used by businesses to manage customer credit, minimize bad debts, and ensure timely payments. It includes setting credit limits, monitoring receivables, and enforcing payment terms.

Creditor Days (also known as Payables Days) measures the average number of days a company takes to pay its suppliers after receiving goods or services.

Individuals or entities to whom a business owes money, typically suppliers or lenders.

Debtor Days (also known as Receivables Days) measures the average number of days it takes for a company to collect payments from its customers after a sale.

The Gearing Ratio measures the proportion of a company’s capital that is financed through debt.

A financial state where an individual or business is unable to meet financial obligations when they become due.

Liquidation is the process of closing a business and distributing its assets to creditors and shareholders.

Liquidity refers to a business's ability to convert assets into cash quickly to meet short-term obligations.

Stakeholders are individuals or groups who are affected by or have an interest in a business's activities.

The Stock Turnover Ratio measures how often a company sells and replaces its inventory within a given period.