You are on page 1of 3

ASSET EFFICIENCY RATIO

1) Total Assets Turnover Ratio=Net Sales/Total Assets 1998-99 1999-2000 2000-01 2001-02 3410 4483 4526 5282 2855 8357 6922 9674 1.19 0.54 0.65 0.55

Net Sales Total Assets Ratio

2002-03 9351 11709 0.80

INDICATION: This ratio shows the firms ability to generating sales from all financial resources committed to total assets. A total asset includes fixed assets, current assets & investment. This ratio suggests managers ability to fully utilize all total assets to generate more sales out of available resources. This ratio is computed by dividing net sales to total assets.

Total Assets Turnover Ratio


1.40 1.20 1.00 TIMES 0.80 0.60 0.40 0.20 0.00 1998-99 1999-2000 2000-01 YEARS 2001-02 2002-03 0.54 0.65 0.55 1.19 0.80

Total Assets Turnover Ratio

INTERPRETATION: A firms ability to produce a large volume of sales for a given amount of its operating performance. The ratios of CADILA HEALTH CARE LTD. were 1.19,0.54,0.65,0.55,0.80 in year 1999,2000,2001,2002,2003 respectively. The highest ratio was in year 1998-99 which was 1.19, which implies that the company is producing Rs 1.19 of sales for rupee 1 capital employed in net asset. But the ratio was decreased substantially over last four years, which shows inefficient use of total assets.

2) Fixed Assets Turnover Ratio=Net Sales/Fixed Assets

Net Sales Fixed Assets Ratio

1998-99 3410 1421 2.40

1999-2000 2000-01 2001-02 2002-03 4483 4526 5282 9351 2548 2633 3826 6829 1.76 1.72 1.38 1.37

INDICATION: To ascertain the efficiency and profitability of business, the total fixed assets are compared to sales. The more the sales in relation to the amount invested in fixed assets, the more efficiency is the compared to investment in fixed assets, it means that fixed assets are not adequately utilized in business. Of course, excessive sale is an indication of over trading and is dangerous.
Fixed Assets Turnover RATio
3.00 2.50 2.00 TIMES 1.50 1.00 0.50 0.00 1998-99 1999-2000 2000-01 YEARS 2001-02 2002-03 2.40 1.76 1.72 1.38 1.37

Fixed Assets Turnover RATio

INTERPRETATION: This ratio is highest in year 1998-99, which shows the fixed assets are being used effectively to earn profit in the business. This is happening because that the fixed assets shown in the denominator in their written down value and hence this ratio for a company using old assets will have low value in denominator and, therefore this ratio will be high. Fixed assets ratio is lowest in year 2002-03, i.e. 1.37 indicates that investment in fixed assets is more than what is necessary and must be reduced.

3) Working capital turnover ratio=Net Sales/net working capital

Net Sales Net Working Capital Ratio

1998-99 3410 748 4.56 0.2194

1999-2000 4483 4575 0.98 1.02052

2000-01 2001-02 4526 5282 1556 2865 2.91 1.84 0.3438 0.5424

200203 9351 2007 4.66 0.2146

INDICATION: A firm may also like to relate net current assets (or net working capital gap) to sales. It may thus compute net working capital turnover ratio by dividing net sales by net working capital.

Working Capital Turnover Ratio


5.00 4.00 TIMES 3.00 2.00 1.00 0.00 1998-99 1999-2000 2000-01 2001-02 YEARS 0.98 2.91 1.84 4.56

4.66

2002-03

Working Capital Turnover Ratio

INTERPRETATION: The reciprocal of the ratio is 0.21,1.02,0.34,0.54 and 0.21 during last five years. This ratio indicates the hoe many rupees of net current assets are needed for one rupee of sales. Ratio of the company was highest in year 2002-03 because of increase in sale of year 2002-03 without increase in net current assets.