![]() ![]() Liquidate Assets and Improve Efficiency: The company needs to have proper asset plan which deals with purchase and sale of assets strategically.The company should find a way to move those slow-moving goods quickly. The company can also the examine the warehouse to ascertain whether there are slow moving stocks held in the warehouse. The company needs to move its stock effectively and engage in promotional activities through advertisements. Improve Revenue: Improving revenue is easiest way to a healthy asset turnover ratio.This can be done by outsourcing the collection task to collection agency, hiring an employee overseeing accounts receivable or reducing the debtors credit period to at least industry norms. By preparing and strictly adhering to a debtor’s policy, the company can actually improve the assets turnover ratio. Improve Debtors Collection: The slow pace of collection of accounts receivables increases the chance of lowering the sales.Let’s discuss how the assets turnover ratio can be improved: Various popular variations include Fixed Asset Turnover Ratio and Current Assets Turnover Ratio.Ī higher ratio indicates that assets are being utilized efficiently, while the lower ratio reflects ineffective assets management. Average total assets are calculated after dividing the opening and closing balance of the assets by 2. Here, Net sales are after-sales return as well as sales discounts. ![]() Different versions of the ratio depending on what type of asset is to be considered.Īsset Turnover Ratio = Net Sales/ Average Total Assets It measures per rupee investment in assets used to generate sales. The asset Turnover ratio compares the company’s net sales with the total assets. The asset turnover ratio is one of the necessary financial ratios that depicts how the company utilizes its asset to generate turnover or sales. ![]()
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