The higher this ratio is for a company, the better it uses its working capital to generate revenues. However, this ratio is usually a better indicator of a company’s operations than using total assets. It is also a type of asset turnover ratio. The Net Working Capital Turnover is a ratio that signifies the efficiency of a company in using its working capital. AdvertisementsĪsset turnover = Sales / Fixed Assets 3) Net Working Capital Turnover While it is a type of asset turnover ratio, some stakeholders prefer only to consider the company’s fixed assets to evaluate its efficiency. This ratio only considers the use of long-term assets as compared to short-term. The Fixed Asset Turnover is a ratio that measures the efficiency of a company in the use of only its fixed assets to produce sales. The higher the company’s asset turnover ratio is, the better and more efficient it is considered by stakeholders.Īsset turnover = Sales / Total Assets 2) Fixed Asset Turnover It gives a summary of all the asset management turnover ratios. The Total Asset Turnover is a ratio that measures the efficiency of a company in the use of all its assets to produce sales.

Some of the most commonly used asset management ratios are as below. Therefore, asset management ratios can help with all these aspects and much more. Similarly, just because companies can make profits doesn’t mean they are using their assets effectively. However, judging companies by the amount of their profit is not suitable for comparisons. Usually, stakeholders prefer companies with higher profits. Usually, the better these ratios are, the higher the chances of investors and shareholders investing in the company.įurthermore, these ratios allow stakeholders to analyze the financial performance of a company from multiple aspects. Through these ratios, they can calculate the efficiency and effectiveness of their investments. Usually, asset management ratios are crucial for investors and shareholders. The purpose of why stakeholders calculate asset management ratios depends on the type of stakeholder.

Some of the most commonly used asset management ratios include inventory turnover, accounts payable turnover, days sales outstanding, days inventory outstanding, fixed asset turnover, receivable turnover ratios, and cash conversion cycle. Since companies have various types and classes of assets, there are also different ratios for different assets. As the name suggests, these ratios usually consider only two factors, a company’s assets and revenues. Through these ratios, the company’s stakeholders can determine the efficiency and effectiveness of the company’s assets management.ĭue to this, they are also called turnover or efficiency ratios. Asset management ratios are a group of metrics that show how a company has used or managed its assets in generating revenues.

Fixed asset turnover ratio formula