54151 fixed asset turnover fixed asset turnover ratio

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5.4.15.1 Fixed Asset Turnover Fixed Asset Turnover Ratio calculates the value of revenue achieved per dollar of investment. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher ratio indicates better asset management and utilization and vice versa. Fixed Asset Turnover = [Revenue/Net Fixed Asset] Fixed Asset Turnover YEAR 2010 2011 2012 Revenue 5,555,178,105.00 6,408,962,823.00 5,614,359,565.00 Net fixed asset 977,358,392.00 1,721,436,551.00 1,904,407,294.00 Fixed Asset Turnover 568.39% 372.30% 294.81% The fixed asset turnover was 568.39% in 2010. Then it continuously decreased drastically to 372.30% in 2011 and 294.81% in 2012. The ratio started falling from 2011, and this trend continued till 2012. An unprecedented increase in fixed assets was responsible for this trend. While revenue only increased by 15.37% from 2010 to 2011 and, fixed assets increased by 76.13% for the same period and the same thing continues for 2012. A possible reason for the increasing value of fixed assets was raising inflation. Inflation rates rose from 5.43% in 2009 to 10.7% in 2011. This Fida Hossain 09204035 Page 55
Financial Performance Analysis of Dhaka Bank Limited meant that the new assets bought and recorded from 2010-11 were recorded at a higher value, increasing the amount of fixed assets exponentially. 5.4.15.2 Net Asset Turnover The net asset turnover ratio measures the ability of management to use the net assets of the business to generate sales revenue. A well-managed business will be making the assets work hard for the business by minimizing idle time for machines and equipment. Too high a ratio may suggest over-trading, that is too much sales revenue with too little investment. Too high a ratio may suggest under-trading and the inefficient management of resources. Revenue Net Asset Turnover = Net Asset Net Asset Turnover YEAR 2010 2011 2012 Revenue 5,555,178,105.00 6,408,962,823.00 5,614,359,565.00 Net asset 90,140,874,134.00 105,037,213,825.00 133,616,109,915.00 Net Asset Turnover 6.16% 6.10% 4.20% Net asset turnover was 6.16% in 2010. From 2011 onwards, it had been falling at different rates. It fell to 6.10% in 2011 and 4.20% in 2012. It fell in 2011 due to a greater percentage increase in net assets compared to revenue. In 2012 the ratio fell drastically because of significant increase in net assets as well as slight decrease in revenue. The downward trend of net asset turnover, which started from 2011 and continued till 2012, can be explained by the increasing of net assets, the rate of which is substantially greater than the rate of growth in revenue. Rapidly growing fixed assets increased net assets, thus bringing down net asset turnover. Fida Hossain 09204035 Page 56
Financial Performance Analysis of Dhaka Bank Limited 5.4.16 Return on Asset ROA is an indicator of a company’s profitability. ROA is calculated by dividing a company’s net income in a fiscal year by its total assets. It is known as a profitability or productivity ratio, because it provides information about the management's performance in using the assets of the small business to generate income. ROA can be used as a valuable tool to measure progress against predetermined internal goals, a certain competitor, or the overall industry. ROA is also

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