![]() However, we usually segregate the Working Capital Turnover into various ratios, namely: 1. Working Capital Turnover Ratio = Sales or Cost of Goods sold/Working Capital It measures the efficiency with which a firm is using its working capital. Therefore,Ĭurrent Assets Turnover Ratio = Sales or Cost of Goods sold/Current Assets ![]() It assesses the efficiency with which the entity uses its current assets. Net Current Assets = Current Assets – Current Liabilities. Net Assets or Capital employed = Net Fixed Assets + Net Current Assets Thus,Ĭapital Turnover Ratio = Sales or Cost of Goods sold/Net Assets A higher ratio indicates better utilization of long-term funds of owners and the lenders. It measures the entity’s ability to generate sales or cost of goods sold per rupee of long-term investment. Capital Turnover Ratio or Net Assets Turnover Ratio: Thus,įixed Asset Turnover Ratio = Sales or Cost of goods sold/Fixed Assets 3. A higher ratio shows the efficient utilization of fixed assets to generate sales. It indicates the efficiency with which a business utilizes its fixed assets. Total Asset Turnover Ratio = Sales or Cost of goods sold/Total Assets 2. It indicates the efficiency with which a business utilizes its total assets. Meaning, Objectives, Advantages and Limitations of Ratio Analysis.Browse more Topics under Accounting Ratios It also measures the frequency of sales with respect to capital assets, working capital or average inventory. Hence, we also call these Asset management ratios. These ratios assess the efficiency with which the business manages and uses its assets. Thus, these are also called Efficiency or Performance Ratios. The turnover or Acidity Ratios measure the efficiency of operations of a firm on the basis of effective utilization of resources.
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