Generally, financial ratio is a straightforward numerical comparison of typically 2, 3 or even more items from the company’s financial reports.
Who Uses Asset Utilization Ratios
- Business people in addition to managers work with ratios of types to chart the’ progress, discover new developments and easily and on time indicate possible problems for the business.
- Lenders look into business ratios if they are seeking to come to a decision whether to make an investment or give loans to the business.
The Asset Utilization Ratios are metrics for the pace a company can turn its assets into sales and profits.
The usage of ratio assessment, particularly with small business, is of biggest value whenever performed as time goes by to track changes in business performances as well as assess the potential of current and future strategies.
Major Asset Utilization Ratios:
1) Receivables turnover
2) Inventory turnover
3) Fixed assets turnover
4) Overall assets turnover
Asset Utilization Ratios track the productivity with which a corporation uses the resources to create product and service sales. The bigger the turnover ratio – the more effective the business will be.