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Fixed Asset Turnover: Advanced 2

However, we do know that Vodafone has an intangible assets issue in the same way that the Carphone Warehouse has, so we need to adjust for that to give us a true view of operating asset turnover. When we discussed the total asset turnover ratio we assumed that Vodafone's goodwill value was £100,000 million and adjusted the ratio for that: we can do the same with the fixed asset turnover ratio since intangible assets are part of fixed assets.

Again, the ratio has improved over the previous year, an increase of 54%. However, the values of the ratios have changed, of course, and for the latest year the ratio is 0.43 times when the unadjusted value was 0.15 times. Similarly for 2001, unadjusted it was 0.1 times and adjusted it is 0.28 times.

These are not very high ratios, of course and they are a fraction of the values of the equivalent Carphone Warehouse ratios suggesting that Vodafone is nowhere near as efficient as the Carphone Warehouse.

Vodafone has clearly made some effort to resolve a weak current asset turnover ratio, increasing it threefold over the two years we are looking at. This is good news, of course, and we will look into the stock and debtors part of the current asset turnover ratio in a following section.

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