3. 3 Analysis of Financial Statements Asset Management Ratios Asset management ratios are important forms need to manage assetsiently because capital and to acquire those assets is expensive. These ratios include the inventory turnover rate. 2) Days outstanding (3) ed assets turnover, and (4) Total assets turnover The inventory tumover ratio indicates how many times during the year inventory Inventory turnover ratio- Sales Inventor Excess inventory is unproductive and represents an investment with a rate ofren Analeve det of the wory were presses in the camerator with rationale for this measurements that wetery is came to, so sales in the numerator overstates the true inventory umove the days sales outstanding (50) Patis called the average collection pened (ACP) tuation is DSO-Days sales outstanding Receivables Averages per day Receivables Annual sales/365 The so can also be evaluated by comparison with the terms on which the tumet goods if as trend has been in and receivables. The found assets turnover rate measures how effectively the muset plant and its policy has not changed, this would indicate a need to speed up the collection Predstave ratio Sales Netts There can be problems interpreting this ride to the party when an older compared with a new company. The total sets to be measures how effectively the uses its totales and whether them generates enough es given its totales. Its en is Totaltumver ratio Sales Total wat 3. 3: Analysis of Financial Statements: Asset Management Ratios Asset management ratios are important forms need to manage assets efficiently because capital obtained to acquire those assets is expensive. These ratios include the: (1) Inventory turnover ratio (2) Days sales outstanding. (3) Fixed assets turnover, and (4) Total assets turnover. The inventory turnover ratio indicates how many times during the year inventory is Select and restocked. Its equation is Inventory turnover ratio Sales Inventories Excess inventory is unproductive and represents an investment with a selectate of return. An alternative definition of the inventory turnover ratio replaces sales in the numerator with The rationale for this measurement is that inventory is carried at cost, so sales in the numerator overstates the true inventory turnover ratio. The days sales outstanding (DSO) ratio is also called the average collection period (ACP). Its equation is DSO-Days sales outstanding Receivables Average sales per day Receivables Annual sales/365 The so can also be evaluated by comparison with the terms on which the firm Select its goods. If its trend has been rising and select policy has not changed, this would indicate a need to speed up the collection of receivables. The fixed assets turnover ratio measures how effectively the firm uses its plant and equipment. Its equation is: Fixed sets turnover ratio Sales Net fixed assets There can be problems interpreting this ratio due to select particularly when an older form is compared with a newer company. The total assets turnover ratio measures how effectively the firm uses its total assets and whether the firm generates enough sales given its total assets. Its equation is: Total assets turnover ratio Sales Total assets