Asset Management Ratio

Effective company asset management aims to optimize asset use, reduce costs, increase revenues, and improve return on investment.

Understanding asset management ratios, also known as asset turnover ratios or asset performance ratios, is crucial. These financial indicators reveal how efficiently a business is operating, making it a powerful tool for optimizing asset use, reducing costs, and increasing revenues.

Asset Management Ratios Formula

Asset management ratios are not just numbers on a financial statement. They are powerful tools that reveal how well a company is managing its assets and the productivity those assets are generating. For businesses eyeing expansion or investors considering where to put their money, these ratios are invaluable indicators of a company's potential. 

Asset management ratios are calculated by dividing revenue by various types of assets. The interpretation of these ratios depends on industry norms and company performance. Analysts use the return on assets ratio to evaluate a company's level of asset management. This financial indicator is determined by the ratio of business profit to the value of its assets. It shows how efficiently a company utilizes its resources. 

Example of asset management ratios

Asset management ratios include

• average collection period (also called days sales outstanding ratio),
• inventory turnover ratio,
• fixed asset turnover ratio, and
• total asset turnover ratio.

Definition of Asset Turnover Ratio. This ratio compares a company's gross revenue to its average total assets. It lets you know how many sales were generated from each dollar of a company's assets.