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Higher ‘times’ of turnover is good? Or lower is better?
x Co. – 1.7 (having luxury assets for running service biz)
y Co. – 8.1 (having low value of assets for running service biz)Please correct the statement below:
High assets turnover rate implies the efficient use of assets to generate income. However, in substance X Co. was having a pricing strategy i.e charge customer at premium price whereby company with high profit margins which have low assets turnover.- Topics: 0
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a)3 ratio calculate togather before evaluate a co. good or bad.
Asset Turnover
Pofit Margin
Return on Capital Employed.b)Plus both different market. Niche Luxury and Cost Focus.
c) Premium price by luxury. May have low asset turnover. High Asset turnover can be cope if Marketing Strategy in correct Strategic Area.
Co y may have basic asset in which is commonly used through out the operation hours, where co x may have complex asset and unused for the business at full capacity.d) Efficiency in service business is not based on asset turnover, but sales productivity.
hopefully, statement would be appropriate if stating the value from the value calculated and try to turn he possible answer around the number. Numbers seldom bring you wrong direction.:-
Co X invested in core value asset which assist in generating value, where as Co Y invested in luxuries asset, where by most of the asset may not be generating value.
Co X may have to focus on quality of service resulting slower asset turnover compare to Co Y. Co Y would have target the low earning power customers rather than wealthy customers as portrait by Co X. This is supported by the turnover difference of Co Y.
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