management Back Forwards
Accounting: Ratio Analysis
 

(5) Net Asset turnover

The ability of assets to be used to obtain sales - how many times does the sales value exceed the value of the net assets (long-term financial base) employed by the company?

______Turnover (Sales)____
=
725.8
=
1.9times
Total assets less current liabilities
382.1

Profit Margin x Net Asset Turnover = Return on Net Assets (Capital Employed)

14% x 1.9 = 26%

This indicates that Smiths earns a high margin on its sales (high technology - high value added goods) but requires a large capital base to support its operations.

 

Working Capital Management

Working Capital to Total Assets Ratio A measure of the overall balance between fixed assets and working capital within the company to assess the adequacy of working capital. It is perhaps most useful to monitor trends in this ratio.

= Working Capital (CA - CL or Net current assets)
Total Assets

 

____234.3___
=
_234.3_
=
.37 or 37%
147.8+484.5
632.5