The business activity of a commercial organization is measured using a system of qualitative and quantitative indicators. Thanks to the coefficient of business activity, it is possible to analyze how effectively the funds are used by the enterprise itself. Under the analysis refers to the study of the dynamics and levels of financial turnover ratios.
The quality criteria are the business reputation of the company, the breadth of the market, the competitiveness of the company, the availability of suppliers and a constant market for finished products. These criteria can be compared with similar indicators of competitors that operate in the industry. Information can be taken from marketing research and accounting.
Relative and absolute indicators stand out as quantitative indicators of business activity . These quantitative parameters should be compared in dynamics over a number of periods. All ratios are expressed in times, and the turnover period in days. For an organization, these metrics are very important. The size of the annual turnover depends on the size of the annual turnover. The relative value of production costs is associated with turnover. The financial position of any company depends on how soon the funds that are invested in assets are converted into real monetary assets.
The business activity of the company is evaluated through the use of two groups of indicators: general indicators of turnover, as well as indicators of asset management.
To assess how effectively the company uses its resources, regardless of the source of their receipt, the so-called asset turnover ratio is used. With its help it is possible to characterize the number of complete production and circulation cycles for which the company can make a profit.
Asset turnover ratio : calculation methodology
First you need to fill out the company's balance sheet in form No. 1. Analysis of turnover is carried out using sections 1 and 2 of the reporting. It is required to reflect information on intangible assets, construction in progress, fixed assets, stocks, investments, raw materials, receivables and cash. Now you should summarize the lines 190 and 290, and then summarize and get the asset balance reflected in line 300.
Next, you should generate a profit and loss statement of enterprises in the form of No. 2. The asset turnover ratio will be calculated using the value from line 010, which contains information about the company's revenue from product sales, work and services. It is customary to form this line on the basis of accounting as the amount of loans on accounts: 90.1 “Revenue”, excluding debit on account 90.3 “VAT”, as well as 90.4 “Excise taxes”.
Now you can get the asset turnover ratio, you can calculate it as the ratio of revenue from the sale of goods to the total price of assets of the enterprise. The result of this will be a ratio showing the number of monetary units of the goods sold, which refers to a unit of assets. After analyzing the result, you can determine the nature of the turnover of funds that are available to the company. The higher this indicator, the greater the profit from each unit of the price of an asset. It is best to calculate this ratio for each reporting period, then to carry out a comparative analysis.
In a financial analysis, you can also use the degree of return on assets if you multiply the asset turnover by the net profit ratio.