BUS 320 Lecture Notes - Lecture 3: Asset Turnover, Inventory Turnover, Fixed Asset

• School: NCSU
• Department: Business Management
• Course: BUS 320
• Professor: Bartley R Danielsen

Document Summary

Used to weigh and evaluate operating performance of firm. Compares performance record against similar firms in industry. Additional evaluation of company management, physical facilities and other factors is needed. Financial data reported by s&p, moody"s, etc. Measure firm"s ability to earn adequate returns. Measure speed at which firm turns over. Evaluate in light of asset base, earning power. Emphasize firm"s ability to pay off short-term obligations as they come due. Secondary considerations liquidity and debt utilization. Users of financial statements have differing degrees of importance in categories of ratios. Primary consideration - debt utilization ratios (debt to total assets) and profitability ratios. Table 3-1 financial statement for ratio analysis. Satisfactory return on assets can be derived through. Rapid asset turnover (generating more sales per dollar of assets) Satisfactory return on equity can be derived through. Return on equity = return on assets (investment) (1 debt/assets)