2nd October 2019

myaccountingcourse

9

What is the formula of asset turnover ratio?

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The asset turnover ratio is calculated by dividing net sales by average total assets. Net sales, found on the income statement, are used to calculate this ratio returns and refunds must be backed out of total sales to measure the truly measure the firm's assets' ability to generate sales.

What is the formula for fixed asset turnover ratio?

Definition: The fixed asset turnover ratio is an efficiency ratio that measures a companies return on their investment in property, plant, and equipment by comparing net sales with fixed assets. In other words, it calculates how efficiently a company is a producing sales with its machines and equipment.

How do you calculate the average total assets?

Determine the amount of average total assets. To determine your average total assets, you will need to go back two years in your bookkeeping. Find the amount of your total assets for the current year and previous year, then add the two numbers together. Next, divide the total amount by 2.

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What is a low asset turnover ratio?

A: The asset turnover ratio measures a company's efficiency and productivity. A company can increase a low asset turnover ratio by continuously using assets, limiting purchases of inventory and increasing sales without purchasing new assets. It is calculated by dividing a company's sales by its total assets.

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What is considered a good fixed asset turnover ratio?

A: The fixed asset turnover ratio is a metric that measures sales to the value of fixed assets. If a company has a higher fixed asset turnover ratio than its competitors, it shows the company is effectively using its fixed assets to generate sales better than its competitors.

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What is the fixed asset turnover ratio?

Fixed-asset turnover is the ratio of sales (on the profit and loss account) to the value of fixed assets (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets.

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How do you calculate times interest earned?

The times interest earned ratio is calculated by dividing income before interest and income taxes by the interest expense. Both of these figures can be found on the income statement. Interest expense and income taxes are often reported separately from the normal operating expenses for solvency analysis purposes.

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How do you calculate inventory turnover?

Part 1 Finding the Inventory Turnover Ratio

Choose a time period for your calculation.
Find your cost of goods sold for the time period.
Divide your COGS by your average inventory.
Use the formula Turnover = Sales/Inventory only for quick estimates.

6

What is the formula for current ratio?

Calculate your current ratio below. Current ratio is a comparison of current assets to current liabilities, calculated by dividing your current assets by your current liabilities. Potential creditors use the current ratio to measure a company's liquidity or ability to pay off short-term debts.

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What does inventory turnover ratio indicate?

Inventory turnover is a ratio showing how many times a company has sold and replaced inventory during a period. The company can then divide the days in the period by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. It is calculated as sales divided by average inventory.

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How do you calculate inventory turnover ratio?

The inventory turnover ratio is calculated by dividing the cost of goods sold for a period by the average inventory for that period. Average inventory is used instead of ending inventory because many companies' merchandise fluctuates greatly throughout the year.

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How do you calculate return on equity?

Return on equity may also be calculated by dividing net income by average shareholders' equity. Average shareholders' equity is calculated by adding the shareholders' equity at the beginning of a period to the shareholders' equity at period's end and dividing the result by two. 3.

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What is the leverage ratio?

What is a 'Leverage Ratio' A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt (loans), or assesses the ability of a company to meet its financial obligations.

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How do you calculate net assets?

Net assets is defined as total assets minus total liabilities. In a sole proprietorship the amount of net assets is reported as owner's equity. In a corporation the amount of net assets is reported as stockholders' equity.

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How do you calculate the return on assets?

A company's return on assets (ROA) is calculated as the ratio of its net income in a given period to the total value of its assets. For instance, if a company has $10,000 in total assets and generates $2,000 in net income, its ROA would be $2,000 / $10,000 = 0.2 or 20%.

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How do you calculate accounts receivable turnover?

The receivables turnover ratio is an activity ratio measuring how efficiently a firm uses its assets. Receivables turnover ratio can be calculated by dividing the net value of credit sales during a given period by the average accounts receivable during the same period.

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What is working capital turnover ratio?

The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company's effectiveness in using its working capital. Working capital is defined as the total amount of current assets minus the total amount of current liabilities.

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How do you calculate the profit margin ratio?

The profit margin ratio formula can be calculated by dividing net income by net sales. Net sales is calculated by subtracting any returns or refunds from gross sales. Net income equals total revenues minus total expenses and is usually the last number reported on the income statement.

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What is the capital intensity ratio?

Capital Intensity Ratio. Capital intensity ratio of a company is a measure of the amount of capital needed per dollar of revenue. It is calculated by dividing total assets of a company by its sales. It is reciprocal of total asset turnover ratio.

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What is the average collection period?

The average collection period is the average number of days between 1) the date that a credit sale is made, and 2) the date that the money is received from the customer. The average collection period is also referred to as the days' sales in accounts receivable.

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What is the debt to asset ratio?

The debt to total assets ratio is an indicator of financial leverage. It tells you the percentage of total assets that were financed by creditors, liabilities, debt. The debt to total assets ratio is calculated by dividing a corporation's total liabilities by its total assets.

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What does the profit margin ratio tell us?

Profit margin is a profitability ratios calculated as net income divided by revenue, or net profits divided by sales. A 20% profit margin, then, means the company has a net income of $0.20 for each dollar of total revenue earned.

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What is the average total assets?

To calculate the average total assets, add the total assets for the current year to the total assets for the previous year,and divide by two.

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