Continued from my last article, we will now look at the financial ratio for assessing the activity of assets deployed by the company. Essentially, the activity ratios measure the efficiency of managing or using of assets like
- total assets,
- accounts receivable,
- inventory, and
- accounts payable.
| Ratio | TOTAL ASSETS TURNOVER |
| Formula | Net Sales Total Assets (or average) or Accounts Receivable, Inventory |
| Use | Measure the efficiency of the usage of total assets in generating sales. |
| Values | Varies. The higher is the more effective |
| Interpretation | Comparing similar periods and similar industry statistics determines measures of efficiencies by which the assets are employed in the business. |
FCCA,CA(MIA)with more than 26 years of post-qualifying working experiences. Previous working stints with one of the big accounting four, Regional GFC & Group Treasurer in a group of Malaysian and Group CFO in Singapore public listed concern.
Also author to another very popular free educational accounting cum finance blog: http://basiccollegeaccounting.com under the branding of College Accounting Coach.
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