Business planning. Turnover ratios of working capital, fixed assets, assets (the most important)

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Business planning. Turnover ratios of working capital, fixed assets, assets (the most important)

Lecture notes, cheat sheets

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42. TURNOVER RATIO OF WORKING CAPITAL, FIXED ASSETS, ASSETS

Working capital turnover ratio {Net working capital turnover) is equal to the ratio of total sales revenue for the year to the average annual value of net working capital NWO.

Working capital turnover = Revenue / Net working capital.

This indicator shows how effectively the company uses investments in working capital and how this affects sales growth. The higher the value of this ratio, the more efficiently the company uses net working capital.

Fixed assets turnover ratio {Fixed turnover assets) equal to the ratio of the total revenue from sales of products for the year to the average annual value of the amount of fixed assets. Fixed Asset Turnover = Revenue / Fixed Assets.

This indicator, also called the capital productivity ratio, characterizes the efficiency of the use of fixed assets by the enterprise. The higher the value of the coefficient, the more efficiently the company uses fixed assets. A low rate of return on assets indicates insufficient sales or too high capital investment. It should be noted that this coefficient has a strongly pronounced industry specificity. In addition, the value of this indicator largely depends on the methods of calculating depreciation and the practice of assessing the value of assets. It is quite possible that an enterprise using depreciated fixed assets has a higher capital productivity ratio than a modernized enterprise.

Asset turnover ratio (total assets turnover) is equal to the ratio of the total revenue from product sales for the year to the average value of the sum of all assets:

Asset turnover = Revenue / Total assets.

The indicator characterizes the efficiency of the company's use of all available resources, regardless of the sources of their attraction, and shows how many times a year the full cycle of production and circulation takes place, bringing the effect in the form of profit. When considering this indicator, industry specifics should be taken into account.

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