What causes a company's Net Asset Turnover to decline and what are the consequences and implications...

What causes a company's Net Asset Turnover to decline and what are the consequences and implications thereof? (2 paragraphs)

Expert Solution

Current assets = Total assets-total Outside liability, it is also equal to share-holders' equity. Turn over refers to Revenue received against sale or services or both. The ratio is calculated as turnover divided by net assets. This is a comparative tool to compare same ratio from that of earlier year or years.There may be many causes of declining this ratio among others some are 1) Declining in turn over as compared to previous year. 2) Increase in net assets 3) inability to use net assets efficiently. 4) Additions of fictitious assets.

If the turnover ration is very high it may indicate that investment is very low as compared to requirement of funds in the company. on thecontrary if ratio is vary low (In relation to comparable firms), it may suggest inefficient management of the funds of the company. It may also indicate that company is not able to sell its product in the market either because of inefficiency of the sales person, or because of better products availble in the market at the low price.

ekkarill92 answered 1 year ago

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