A group of ratios that shows how efficiently the company is managing its assets to generate and maximize sales revenues is known as Asset Management Ratios. To know more about it, click on the link given below: https://efinancemanagement.com/financial-management/asset-management-ratios-types-interpretations-advantages-disadvantages-and-more

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https://efinancemanagement.com/financial-management/asset-management-ratios-types-
interpretations-advantages-disadvantages-and-more
Asset Management Ratios

2. 1. Meaning
2. Interpretation
3. Types
4. Advantages
5. Disadvantages
6. Reference
Content

3. A group of ratios that shows how efficiently the company is managing its assets to generate and maximize sales revenues
is known as Asset Management Ratios.
The purpose is to analyze how effectively the company is able to deploy productively its assets to derive its revenue. And
these ratios show the operating efficiency of the organization. There are many types of Asset Management Ratios. And
all of these individually represent and suggest the utilization status of different types of asset classes.
Meaning

4. Asset Management Ratio > 1
Ratio above 1 claims, that the proportion of sales is higher than the total quantum of assets deployed and the company is
productive. A high Asset Management Ratio is always preferable.
Asset Management Ratio < 1
Ratio of less than 1 says that the proportion of assets in the company is higher than the proportion of sales revenue.
And lower the ratio, the worst is the company’s efficiency, in comparison to the competitors in the same industry.
Asset Management Ratio = 1
This situation is neither appreciable nor desirable. Asset Management Ratio equals 1 interprets that the proportion of
assets and sales is equal in the company.
Interpretation

5. 1. Total Asset Turnover Ratio
It considers all assets given in the balance sheet and total sales revenue recorded in the Profit and Loss Statement.
Total Asset Turnover Ratio (in proportion or times) = Sales Revenue/ Total Assets
2. Fixed Asset Turnover Ratio
This ratio tells, how efficiently fixed assets of the firm are used in generating sales revenue.
Fixed Asset Turnover Ratio (In ratio or times) = Sales Revenue/ Total Fixed Assets
3. Net Working Capital Ratio
Net Working Ratio, tells how effectively and efficiently Working Capital is used to generate sales revenue.
Net Working Capital = Sales Revenue/ Net Working Capital
4. Inventory Turnover Ratio
It tells how many times in a year the inventory is sold and stock back again.
Inventory Turnover Ratio = Sales Revenue/ Inventory
Types

6. 5. Accounts Receivable Turnover Ratio
It tells how many days of sales of the company will always remain outstanding
Accounts Receivable Turnover Ratio (in proportion or times) = Sales Revenue/ Accounts Receivable
Types

7. • Help the company and the stakeholders in decision-making.
• Help the company in deciding its quantum of investments in assets
• Tells the operational efficiency and effectiveness of the company
• Help in comparing two or more firms in the same industry
• Not only depict the situation of total asset classes but also interpret various asset classes individually
Advantages

8. • It only considers sales revenue and ignores the total profits of the company
• These ratios are completely dependent on historical data and financial statements
• These ratios ignore whether the firm is labor-intensive or capital-intensive.
Disadvantages

9. Reference
To know more about it, click on the link given below:
https://efinancemanagement.com/financial-management/asset-management-ratios-types-interpretations-advantages-
disadvantages-and-more