Asset Management Ratios – Efficiency Ratios
Asset management ratios (also called efficiency ratios or activity ratios) measure how effectively a company uses its assets to generate revenue.
Key Ratios
| Ratio | Formula | What It Measures |
|---|---|---|
| Inventory Turnover | Cost of Goods Sold / Average Inventory | How quickly inventory is sold |
| Receivables Turnover | Net Credit Sales / Average Accounts Receivable | How quickly credit sales are collected |
| Total Asset Turnover | Net Sales / Total Assets | How efficiently total assets generate sales |
| Fixed Asset Turnover | Net Sales / Net Fixed Assets | How efficiently fixed assets generate sales |
Interpretation
Higher ratios generally indicate better asset utilization. However, very high ratios may suggest underinvestment in assets. Always compare ratios with industry averages and trends over time.
Related: International Banking | Life Insurance