The asset turnover ratio is an efficacy ratio that measures a company’s capability to produce sales from its assets by equating net sales with average total assets. In other words, this shows how professionally a company can use its assets to create sales. Analyzing is based on reaching the recent market trend and podcasting the future market with an examined data. The improvement of asset turnover includes various conditions or steps. Let’s check out the steps to improve the assets turnover ratio:
Advance Debtors Collection
If the collection of accounts receivables is at slow speed, there is chance of lowering the sales. This decreases asset turnover ratio. By formulating and firmly adhering to a debtor’s policy, the company can really improve the assets turnover ratio.
Increase Revenue
Increasing revenue is the easiest way to improve asset turnover ratio. The company essentials to move its stock efficiently and engage in advertising activities through advertisements.
Strategically liquidating of assets and Improve Efficiency
The company should have good asset plan which contracts with purchase and sale of assets tactically. Outdated assets should be sold speedily as they are of no use to the input to sales and only makes the balance sheet look underprivileged to the stakeholders. Assets regularly used should be regularly preserved in a scheduled. The management also makes effort to find numerous other ways to increase the competence of the asset.
Go to have assets on Lease
Well, this is not an examined way to progress assets turnover ratio but on technical grounds, this can be implemented. If the company uses the assets on lease, balance sheet does not have record to shown in Profit and Loss Account. The Average Assets in calculation of Assets Turnover Ratio is technically lesser, thus, resultant in higher assets turnover ratio.
finance Management 