Meaning of Current Assets Turnover Ratio
Current assets turnover ratio shows the relationship between net sales and current assets. When we divide the net sales with current assets and multiply with 100, we find that value net sale which has been possible due to $ 100 investment of current assets.
Formula of Current Asset Turnover Ratio
= Net sales / Current Assets X 100
Examples :
1. For example current asset turnover ratio is 20%. It means, we have become successful for doing $ 20 sales when we have invested our money in the form of different current assets like inventory, short term investments, prepaid expenses, outstanding incomes, sundry debtors whose cost is $ 100.
2. For example Walmart company's 2012 sale is $ 443 Billion. Its current assets are $ 54 billion. So, its current asset turnover is = 443 /54 X 100 = 820%. It means net sales is $ 820 on the $ 100 invested current assets.
Important : a) We should calculate current assets turnover ratio with other turnover ratios like stock turnover ratio, creditor turnover ratio, debtor turnover ratio, working capital turnover ratio and fixed assets turnover ratio. Only then, we can analyze our performance.
b) For calculating net sales, we will deduct sales return from total sales.
c) Higher this ratio is better because it will tell that we can sell more products with less investment in current assets.
Related : Fixed Assets Turnover Ratio
Current assets turnover ratio shows the relationship between net sales and current assets. When we divide the net sales with current assets and multiply with 100, we find that value net sale which has been possible due to $ 100 investment of current assets.
Formula of Current Asset Turnover Ratio
= Net sales / Current Assets X 100
Examples :
1. For example current asset turnover ratio is 20%. It means, we have become successful for doing $ 20 sales when we have invested our money in the form of different current assets like inventory, short term investments, prepaid expenses, outstanding incomes, sundry debtors whose cost is $ 100.
2. For example Walmart company's 2012 sale is $ 443 Billion. Its current assets are $ 54 billion. So, its current asset turnover is = 443 /54 X 100 = 820%. It means net sales is $ 820 on the $ 100 invested current assets.
Important : a) We should calculate current assets turnover ratio with other turnover ratios like stock turnover ratio, creditor turnover ratio, debtor turnover ratio, working capital turnover ratio and fixed assets turnover ratio. Only then, we can analyze our performance.
b) For calculating net sales, we will deduct sales return from total sales.
c) Higher this ratio is better because it will tell that we can sell more products with less investment in current assets.
Related : Fixed Assets Turnover Ratio
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