Fixed Asset Turnover
The data:
| Carphone Warehouse Consolidated Profit and Loss Account |
31 March 2001 | 25 March 2000 |
|---|---|---|
| for the year ended | £'000 | £'000 |
| Turnover | 1,110,678 | 697,720 |
| Total Fixed Assets | 396,175 | 100,279 |
| Total Current Assets | 315,528 | 171,160 |
The calculations
Fill in the figures and calculate the ratio values
| Fixed Asset Turnover Ratio for the Carphone Warehouse | ||
|---|---|---|
| 31 March 2001 |
__________ | times |
| 25 March 2000 |
__________ | times |
Did you get this?
What did you think of those results? Well, 2001's result is less than 50% of 2000's result, which is poor on the face of it.
| 2001 | 2000 | Change 2000 - 2001 | |
|---|---|---|---|
| Turnover | 1,110,678 | 697,720 | 59.19% |
| Total Fixed Assets | 396,175 | 100,279 | 295.07% |
In the situation we see here, we will always find that whilst the business is growing, it is growing in such a way that its ratios cannot stay constant. Here we have a 59% increase in sales and a 295% increase in fixed assets: this is bound to mean that the fixed asset turnover will get worse.
What this means is that whilst the business has invested heavily in new fixed assets, turnover has not increased enough to reflect the new investments. We expect to see a major improvement in this ratio next year.
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