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• #Fixed asset turnover full

The company can have slow or ineffective delivery system that can result in delay of service which in result will delay in collection period of accounts receivable. Formulate Robust Inventory Management: The company should analyze how its stock move from company to its customer and know whether there are slow moving or fast-moving products of the company.of Average Assets in calculation of Assets Turnover Ratio is technically lower, thus, resulting in higher assets turnover ratio. If the company takes the assets on lease, the value of assets is not on balance sheet and is shown in Profit and Loss Account. Take Assets on Lease: Well, this is not a fool proof way to improve assets turnover ration but on technical grounds, this can be used.The management should also make effort to find various other ways to increase the efficiency of the asset.

#Fixed asset turnover full

If the company has delivery vehicles, the management should have a plan in place making sure that these vehicles leave the warehouse at full capacity delivery all the goods traveling the least. Bottleneck activities should be removed on the spot. Assets frequently used should be regularly maintained in a scheduled manner while on the other hand, assets that are not frequently used, the company should arrive at strategic decision-making process whether to discard, replace or repair the assets. Obsolete assets should be sold quickly as they are of no use to the contribution to sales and only makes the balance sheet look poor to the stakeholders. 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.