The asset turnover ratio

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2018-03-18 10:00:19

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Business activity of a commercial organization is measured by means of a system of qualitative and quantitative indicators. Due to the factor of business activity fails to analyze how effectively funds are used by the enterprise. Analysis refers to the study of the dynamics and levels of financial ratios turnover.

The role of qualitative criteria are reputation, breadth of market, the competitiveness of firms, availability of suppliers and the constant market for the finished product. These criteria can be compared with competitors who operate in the industry. Information can be taken from market research and financial statements.

As quantitative indicators of business activity are allocated relative and absolute figures. These quantitative parameters should be compared in the dynamics for several periods. All ratios are expressed in times, and turnover period in days. For organizations, these indicators are very important. The annual turnover depends on the size of annual turnover. Relative manufacturing costs associated with turnover. The financial position of any company depends on how soon the funds that are invested in assets are transformed into cash assets.

Business activity of the company is estimated by using two groups of indicators: General indicators of turnover, and indicators of asset management.

To assess how effectively a company uses its resources, regardless of the source, a so-called asset turnover ratio. It can be used to describe the number of full production cycles and oraseneasca for which the company may be received.

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The asset turnover Ratio: the method of calculation

To begin, you will fill in the balance sheet of the company in form No. 1. An analysis of turnover is carried out using 1 and 2 of section statements. Required to reflect information about intangible assets, construction in progress, fixed assets, inventory, investments, raw materials, receivables and cash. Now we should sum up by lines 190 and 290, and then to summarize and to balance asset recognised in the line 300.

Next, you should report the profit and losses of enterprises according to form No. 2. The asset turnover ratio will be calculated using the values from the row 010, which is information on the company's revenue from sales of products, works and services. This line taken form on the basis of accounting as the sum of the credits in the accounts: 90.1 “Revenue”, without regard to the debit account for 90.3 “VAT” and 90.4 "Excise".

It is Now possible to obtain the asset turnover ratio, you can calculate it as the ratio of revenue from sales of goods to the total price of the company's assets. The result will be the ratio showing the number of monetary units of sold product, which is per unit of assets. After analysis of the received results it is possible to determine the nature of the turnover of funds at the disposal of the enterprise. The higher the number, the more each unit of asset prices the company receives profit. It is best to calculate this ratio for each reporting period, then to compare.

In the financial analysis it is also possible to use the degree of profitability of assets, multiplying the asset turnover ratio on net profit.


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Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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