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Friend of mine had exam recently, was asked Asset turnover but not given capital employed figure. What can you substitute in for this formula? Below was given:
Non current assets
Currents assets
Operating profit
Revenue
Loan Charges12% cost of capital
Operating profit over what?
Operating profit is nothing to do with it.
The asset turnover = Revenue / long-term capital
Long-term capital is always equal to total assets less current liabilities.
I do explain this in my free lectures working through Chapter 28 of our free lectures notes.
Apologies, I meant to reference Revenue .. From the above example what would be classified as long term capital?
All the examples I have seen have given capital employed.
Asset turnover on the above should be
Revenue over what?
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