Activity 13 - Capital Employed Turnover
Let's repeat these calculations now by working on Vodafone's capital employed turnover ratio. Gather the data you need, calculate the ratios and make any comments you think are worthwhile.
Did you get this?
Vodafone's ratios continue to say, "There is a problem." Here's another case of a very dynamic business returning a very poor result.
We have the situation here where £1 worth of investment by shareholders is returning as little as £0.10 by way of turnover. Turnover has grown 52% over the two years but capital employed has fallen by 10%. This situation helps to explain why Vodafone's capital employed turnover is so poor.
What is the underlying reason for such a poor ratio, though? We have already seen that around 80% of Vodafone's Net Assets are in the form of intangible assets. Whilst intangible assets are not especially productive assets of themselves, we ought to be able to expect that the source of the intangibles would be generating a more significant level of sales than we can see here.
Vodafone clearly has a problem.