Consider That You Are a fiNance Manager, and One of Your

question 7

Essay

Consider that you are a finance manager, and one of your junior staff wanted an explanation of the
term retention ratio or plowback ratio. Provide a definition that conveys what the term means from a
finance perspective.

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Definitions:

Accounts Receivable Period

The average amount of time it takes for a company to receive payments owed by its customers for goods or services provided.

Inventory

The raw materials, work-in-progress products, and finished goods that a company holds for the purpose of sale in the future.

Cost of Goods Sold

Expenses directly linked to the creation of a company's sold products.

Sales

Sales refer to the transactions where goods or services are exchanged for money, representing the primary source of revenue for most businesses.