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Asset Utilization Ratio - Assignment

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Added on  2020-02-24

Asset Utilization Ratio - Assignment

   Added on 2020-02-24

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1Ratio AnalysisName:Course Professor’s nameUniversity nameCity, StateDate of submission
Asset Utilization Ratio - Assignment_1
2Financial Ratiosa)Return on Capital employed(ROCE)This ratio measures the efficiency of a company in generating profits from its employed capital.ROCE= Net profit (EBIT)/ employed Capital OR net operating profit/(Total Assets-Total Liabilities)Net operating profit =12,000Total Assets=(Fixed assets +Current Assets)132000+7250=139,250Total Liabilities=Current Liabilities+ Long term liabilities(loan)2250+60000=62,250=12,000/(139250-62250)=12000/77000=0.156b)Asset utilization RatioThis ratio calculates the total revenue that the company makes for every dollar of its assets. When this ratio increases it means that the company is more efficient with each dollar of its assets.
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3Significance:The significance of this ratio is that it is used to compare efficiency of the company overtime.Formula= Revenue/ Average total assetsRevenue=195000Average total assets=137000=195000/137000=1.4:1This means that the company generates $1.4 for every $1 dollar of the company’s assets.b)Acid Test Ratio quick ratio is the other name of this ratio is used to measure the ability of the company to honor its short term liabilities with quick assets such as cash equivalents,cash, marketable securities or short term investments and accounts receivables.Formulae;(Cash+ equivalents of cash+short term investments+ Current receivables)/current liabilitiesOR(Total Current Assets-inventory-Prepaid Asset)/Current LiabilitiesCurrent assets=7250Inventory=5200Current liabilities=2250=(7250-5200)/2250=0.91
Asset Utilization Ratio - Assignment_3

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