§ 01
MSFT — ROE, Operating Margin. Open MSFT on the Ledge to see current values.
§ 02
| Ratio | Formula | Interpretation |
|---|---|---|
| Asset Turnover | Revenue / Total Assets | How many dollars of sales per dollar of assets |
| Inventory Turnover | COGS / Average Inventory | How quickly inventory sells (higher = faster) |
| Days Sales Outstanding | Receivables / (Revenue / 365) | Average days to collect payment |
| Cash Conversion Cycle | DSI + DSO - DPO | Days between paying suppliers and collecting from customers |
§ 03
A shorter cash conversion cycle means the company gets paid faster than it pays suppliers. That is free financing from the business model itself.
§ 04
Compare two companies in the same sector using the **Compare** feature. Look at asset turnover and inventory metrics. Better efficiency often predicts outperformance.
§ 05
Company A turns over inventory 12 times per year. Company B turns it over 4 times. Which manages inventory better?
§ 06
Five questions · AI feedback
Sit with the ideas.
Walmart has asset turnover of 2.5x and inventory turnover of 8.5x. A luxury retailer has asset turnover of 0.8x and inventory turnover of 2.0x. Why the difference?
Why: