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3.6 Efficiency ratios - Coggle Diagram

- - - - minimising business costs and increasing revenue. increases the denominator of formula, the capital employed. the ratio will decrease. However, shareholders may be unwilling since dividends will fall
    - - less loan capital results in lowering the gear ratio however cash flow may be reduced
    - - reduces the long term loan which needs to be repaid however the business loses some ownership and impact decision making
    - - value of equity under capital employed will rise however the business loses some control
- - - - allows firms to renegotiate credit terms with suppliers when the firm is facing cash flow problems
    - - inventories are bought when needed instead of buying huge amounts at 1 time. This reduces creditor figures and creditor days