Turnover ratio: formula. Asset Turnover Ratio: Calculation formula

The management of any enterprise, as well as its investors and creditors are interested in the performance indicators of the company. To conduct a comprehensive analysis, various methods are used.

Mandatory study of indicators of profitability and business activity. If the first group considers net profit in the process of analysis, then the second group - sales proceeds. The study of business activity is carried out using a system of indicators. One of the first studied coefficient of turnover, the formula which takes into account all the assets of the company. Further, its structural components are examined. In the analysis, the indicators of liabilities are involved. This allows us to understand how quickly the company turns available resources into money, is calculated on debt obligations.

The concept of the cycle of revolutions

Factor оборачиваемости means of the enterprise allows to estimate, with what speed the capital of the enterprise passes the full cycle. A company that owns resources uses them to manufacture products, sell them and make a profit.

The period for which the funds available to the organization go through all the stages is called the reverse cycle. First, resources turn into finished products. Then it goes on sale. Buyers purchase goods or services, and money is returned back to the organization.

The faster the full cycle, the more revenue the company receives. Therefore, she is interested in accelerating turnover. Analysis of business activity allows us to identify constraining factors. The coefficient of asset turnover, the formula of which considers its structural elements, makes it possible to harmoniously distribute and apply property.

Turnover period

The turnover ratio, the formula of which shows a numerical result, is not always absolutely informative. Its growth in dynamics indicates a positive trend for the organization. But this indicator does not disclose information about the duration of the cycle.

Therefore, such coefficients are presented in days. The analyst can determine exactly how long the period lasts. This allows us to find the optimum value of the coefficient. The researcher evaluates the cycle of turnover of permanent and current assets, accounts payable. But the most attention should be paid to movable property and short-term liabilities. This analysis reflects the system of interaction of the company with suppliers, its marketing and material support of current activities.

Expenditure cycle

The analysts' great interest in the presented analysis is the current assets. Therefore, the coefficient of turnover of circulating assets is applied to the valuation, the formula of which is considered below.

To own information about the factors of influence on this indicator, the financial manager necessarily considers the cycle time of the components of current assets. Their duration (except for cash) is summarized.

This is the indicator of the cost cycle. The longer it takes, the more financial sources the company puts into circulation. They accumulate in it.

The faster the cost cycle, the more funds are released from the turnover. They can be used more constructively.

The general formula

The calculation of the ratio of current liabilities or assets has a general view. This is explained by an identical indicator with which one or another article of property or capital is compared. The formula has the following form:

Cob = Calculation base / Asset (or Passive).

The turnover ratio, the formula of which is applied by the financial services of enterprises, involves taking into account the average annual value of the indicator. Only the estimated article is changed. The numerator of the formula is also selected depending on the coefficient being investigated.

When considering accounts receivable, advance payments to customers, their average annual value is compared with the proceeds from sales. If the speed of turnover of debts on loans and advances to suppliers is calculated, the cost basis is the calculation base. She also participates in the review of indicators of turnover of finished goods, work in progress.

The ratio of inventory turnover, the formula of which corresponds to the above methodology, takes material costs for the base.

Financial statements

To determine the indicators of business activity, apply financial reporting data. The denominator is found according to Form 1 "Balance", and the numerator is in form No. 2 "Profit and Loss Statement". The asset turnover ratio, the formula of which was considered above, according to the reporting, has the following form:

Cob = s. 2110 (Form 2) / s. 1600 md. (Form 1).

To determine the ratio of current assets turnover, the data of line 1200 of the balance are taken into the denominator. The indicator that determines the turnover of fixed assets in the previous formula applies the data reflected in article 1150 of the balance sheet.

In general, the calculation of turnover of current liabilities is as follows:

Cotp = s. 2110 (Form 2) / s. 1300 medium. (Form 1).

If investors need to assess the rate of movement of borrowed capital, in the presented methodology the amount is applied c. 1500 and with. 1400. To calculate the debt of debtors use the data from. 1230, and stocks - the amount from. 1210 and p. 1220.

Inventory

When estimating the movement of stocks, it is more expedient to apply a technique that shows the result in days. This is one of the most important characteristics that the financial service determines. The reserves should be sufficient for the production cycle to pass without failures and stops. But materials should not accumulate, "freeze" in the company's current assets.

The factor of inventory turnover, the formula of which was considered earlier, allows to determine the period in days:

T3 = Material costs / Inventories (average) * 360.

If the reporting period takes another number of days, the calculation takes its duration. In general, the amount of sales proceeds is used to calculate the numerator. But if we are talking about reserves, their movement is determined by the amount of material costs.

To optimize the indicator and speed up the cycle, it is necessary to reduce the number of "dead" stocks that are not purchased with each new operating period.

Receivables, finished goods

The turnover ratio, the calculation formula of which examines current assets such as accounts receivable and finished products, is also of interest to analysts. If a significant amount of money accumulates in these articles of balance, this negatively affects the work of the company. If, after the analysis is made, the debtor's turnover period is too long, it is necessary to change the settlement system with the buyers.

Perhaps, it is necessary to switch to an advance, non-cash type of payment. The amount of bad debt is also determined.

If the enterprise accumulates a significant number of finished goods and work in progress, the sales system is revised, equipment is modernized.

Current assets

The length of the periods of turnover of the balance sheet items is added up. This allows us to evaluate the effectiveness of the operation of the company's property. In general, mobile resources of the company allows you to study the turnover ratio of current assets (the formula was presented earlier).

The increase in the duration of the cost cycle negatively affects a number of other indicators. The coefficient of total liquidity increases with a decrease in its absolute value. The profitability of capital also decreases. In this case, a whole system of measures is developed to optimize the structure of the company's assets.

Accounts payable

Analysts consider not only the speed of the organization's asset cycle. They also study the coefficient of capital turnover (the formula was considered earlier). This methodology shows how many times during the operational period the enterprise calculates with its creditors on its obligations.

Therefore, the calculation takes into account the current debt. Often in an enterprise that has a large amount of accounts receivable, a significant amount of current liabilities is determined. This is a negative trend. Such an organization is limited in the ability to attract borrowed capital, to purchase materials, resources for production in debt. Optimizing the structure of assets, it is possible to improve the performance of liabilities.

Economic effect

A special place in the financial and economic analysis is occupied by the turnover ratios. Formulas on balance allow to find constraining development factors. Qualitative assessment of business activity provides an opportunity to determine how effectively a company conducts its business.

All indicators obtained during the analysis are considered in dynamics and compared with similar coefficients of competing companies. If the turnover ratio, the formula of which makes it possible to assess the structure of the balance, is reduced, the cycle period is accelerated. The organization at the same time expands its sales markets, it has constant suppliers and buyers. This is a competent business policy of the enterprise.

Acceleration of the turnover period indicates a simultaneous increase in the profitability of capital. The company uses its assets effectively. Therefore, the presented system of indicators is necessarily analyzed by the financial service of the organization.