Financial Ratio Analysis - Advanced Asset Usage
Advanced Asset Usage
The advanced equations for this section are:
|
Fixed Asset Turnover
|
= |
Turnover
|
| Fixed Assets |
|
Current Asset Turnover
|
= |
Turnover
|
| Current Assets |
|
Capital Employed Turnover
|
= |
Turnover
|
| Equity Shareholders' Funds |
|
Working Capital Turnover
|
= |
Sales
|
| Working Capital |
Look at this as we try to unravel the more involved aspects of asset usage or turnover:
| Vodafone plc |
31 Mar 2002 |
31 Mar 2001 |
| Consolidated balance sheet |
£m |
£m |
| Fixed assets |
|
|
| Intangible Assets |
105,944 |
108,853 |
| Tangible assets |
18,541 |
10,586 |
| Investments |
28,977 |
34,769 |
| Total Fixed Assets |
153,462 |
154,208 |
Look where the growth in assets is taking place - intangible assets. These intangible assets seem to have appeared between 1999 and 2000 and are probably the reason for such a dreadful total asset turnover ratio. Incidentally most of the intangible assets are goodwill, by the way. For the sake of argument, if we assumed that the goodwill had been around £100 million since it first appeared and then recalculated the total asset turnover ratio, we would find:
| Vodafone plc |
2002 |
2001 |
2000 |
1999 |
1998 |
| Adjusted Total Asset Turnover Ratio |
0.36 |
0.21 |
0.15 |
0.91 |
0.96 |
Making this adjustment makes a difference and it helps us to understand the underlying trend in the total asset turnover ratio; and taking goodwill into account in the way we have is the kind of adjustment that a financial analyst might make were he to look at Vodafone's financial statements.
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Submitted by bized on Thu, 30/01/2003 - 13:00
