Financial Ratio Analysis - Fixed Asset Turnover

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Ratio Analysis ...

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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