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Ratio

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Ratio

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by MikeLittle.
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  • May 31, 2018 at 10:12 pm #455172
    marine09
    Member
    • Topics: 13
    • Replies: 6
    • ☆

    Sir, why does a low asset turnover suggests a capital intensive industry ?

    June 1, 2018 at 4:55 am #455194
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23333
    • ☆☆☆☆☆

    Asset turnover is calculated as revenue / net assets

    If this figure is, say, 1 that means that the assets are earning their own value just once each year and that, in turn, suggests high value assets (in other words “capital intensive”)

    On the other hand, if the ratio is, say, 100 that suggests that low value assets are generating masses of revenue

    Does that make sense to you?

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