Asset to Sales Ratio
This tutorial shows how to calculate the Asset to Sales Ratio in Excel
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=C4/C5
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GENERIC FORMULA
=Total Assets/Sales Revenue
ARGUMENTS EXPLANATION The Asset to Sales Ratio (Total Method) measures a company's total value of assets relative to the sales revenue generated over the relevant period. The ratio identifies how much assets a company has per unit of sales, generated by those assets. This ratio is used to examine the efficiency of a company's utilisation of its assets to generate sales revenue.
The Total Method Asset to Sales Ratio is calculated by using the Total Assets divided by the revenue generated through sales over the relevant period.
In this example the total assets of the company at the end of a financial year is $5,000,000 with sales generated over that period of $2,500,000. Therefore, deriving with am Asset to Sales Ratio of 2.
A lower ratio indicates that the entity is generating its sales revenue from its assets with greater efficiency. |
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=((C4+C5)/2)/C6
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GENERIC FORMULA
=((Assets at beginning of period + Assets at end of period)/2)/Sales Revenue
ARGUMENTS EXPLANATION The Asset to Sales Ratio (Average Method) measures a company's average asset value between the periods of assessment (beginning and end value, average), relative to the sales revenue generated over the period. The ratio identifies how much assets, averaged over the relevant period, a company has per unit of sales, generated by those assets. This ratio is used to examine the efficiency of a company's utilisation of its assets to generate sales revenue.
The Average Method Asset to Sales Ratio is calculated by using the average assets over the period, that is summing the beginning and end asset values and dividing by 2 to generate the average asset value over the relevant period. This is then divided by the total revenue generated through sales over the relevant period.
In this example the average assets of a company is calculated by summing the assets at the beginning of financial year ($4,500,000) and assets at the end of the financial year ($5,000,000) and then dividing this value by 2. This value is then divided by the revenue generated from sales of $2,500,000. Therefore, deriving with am Asset to Sales Ratio of 1.90.
A lower ratio indicates that the entity is generating its sales revenue from its assets with greater efficiency. |
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