We're gonna compare it to the industry average and see how we compare their. What would be a good amount for this ratio? Okay, so we gotta use benchmarking, right? We're gonna compare it to our competitors. Some, some businesses don't have very many fixed assets, so they're gonna have different benchmarks. Um So they're gonna have a lot of fixed assets. A bus company like greyhound busses, they have to have all these busses that cost a ton of money. Again, I've used this example in other videos, the airline industry, right? They're gonna have a lot of fixed assets. Well, you can imagine there's industries that have a lot of fixed assets. So you can imagine this is gonna be different for different industries right here. So how many dollars of sales? How many dollars of sales do we get for each dollar of fixed assets for each dollar of fixed assets. So how do we how do we analyze our fixed asset turnover? Well, what does it tell us? Remember? It's how much of the numerator for each one of the denominator. Okay, so if they just say fixed assets are 100,000, that will be your denominator. And remember if they only give you just one number, they don't give you a beginning and ending balance, We'll just use that number. It's always calculated as this beginning balance plus ending balance divided by two. Okay, that's how we always calculate our average balance. Remember every time we've got an average we're gonna start with our beginning balance, add the ending balance and divide by two. Just like always we're gonna have a division, our numerator has net sales divided by our average fixed assets. Let's go ahead and look at our formula right here. How well are we using our fixed assets? Okay, so fixed asset turnover. While this is going to relate the amount of net sales to guess what our fixed assets, right? Our average fixed assets.
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