Financial Ratio Analysis - Current Asset Turnover

Current Asset Turnover

Along with the basic data we need to calculate the current asset turnover ratio, we have provided the rates of change for each component, too. Use this additional information in your analysis, as we have done with the fixed asset turnover ratio.

Carphone Warehouse 2001 2000 Change
2000 - 2001
Turnover 1,110,678 697,720 59.19%
Total Current Assets 315,528 171,160 84.35%

Fill in the blanks with the data from the above table.

Current Asset Turnover Ratio for the Carphone Warehouse
31 March 2001
__________     times
25 March 2000
__________     times

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Given the rates of change in the turnover and current assets, 59% and 84%, this result has behaved exactly as we would have expected: when the rate of increase in current assets is higher than the rate of increase in turnover, the ratio will fall. Given the increase in investment in current assets this year, however, we need to see this ratio improving next year at least.

Cross-reference: now that we know that the current asset turnover ratio has worsened a little, we need to monitor the effect of this change in detail in our review of the three working capital ratios we are about to look at: stock, debtors' and creditors' turnover. Two of these are part of the current assets turnover ratio and therefore have some influence on its value.

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