Asset management ratios are important $-$ firms 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

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and restocked. Its equation is:

Excess inventory is unproductive and represents an investment with a

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rate of return. The days sales outstanding $($DSO$)$ ratio is also called the average collection period $($ACP$).$ Its equation is:

The DSO can also be evaluated by comparison with the terms on which the firm

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its goods. If its trend has been rising and

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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:

There can be problems interpreting this ratio due to

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particularly when an older firm 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: