One of the most important factors of business activity is the turnover of assets

For a comprehensive assessment of the state of the enterprise, it is necessary to make a lot of calculations, and then analyze the results. An important part of the diagnosis is an analysis of how effectively the enterprise functions. In turn, this can be determined by finding the indicators of two groups: profitability and business activity. It can not be said that some of them are more important than others, they simply characterize the effectiveness in several ways. Now I would like to dwell more closely on the indicators of business activity.

The business activity of an enterprise means how intensively it uses the resources at its disposal. In numerical form, it is described by two types of indicators: the turnover factors and the duration of turnover.

To determine the turnover ratio , you must find the ratio of revenue or cost to the value of an asset or liability. The use of the cost or revenue in the calculations is determined by the properties of what we want to know about the turnover. Thus, the calculation of asset turnover is made using revenue, and inventories - using cost.

If you want to correctly determine asset turnover, you need to understand what values to use for substitution in the formula. The fact is that in reporting you can easily find out the amount of revenue for the period, but the value of assets is determined only on a specific date, and during the period can vary greatly. In connection with these circumstances, you can use the value at the end of the period, but more appropriate is the use of the average value of assets.

Assets in their structure are highly heterogeneous, which means that the turnover of assets as a whole does not allow an objective assessment of the intensity of use of each of them. Non-current assets change little, and are used for a long time, so their turnover is given little attention. In turn, indicators of turnover of current assets are extremely important. It is this group of assets that is directly connected with the provision of the current activity of the enterprise.

Special attention should be paid to the importance of determining the turnover of assets, on which the duration of the financial and operational cycle of the enterprise depends. These include inventories and accounts receivable in respect of buyers' debts. The slower the assets turn, the longer these cycles, which adversely affects the firm's activities.

Pay attention to the calculation of indicators of turnover of certain liabilities. The most important thing is to estimate the rate of turnover of own capital, as well as accounts payable. Again, to determine the duration of the financial cycle, you will need to find out the amount of the period for which the enterprise's accounts payable to its suppliers and contractors turn around. In this case, the positive phenomenon will be, strangely enough, an increase in this period, that is, a slowdown in turnover.

As you can see, for the most objective determination of the degree of intensity of resource use, it is advisable to determine not only the turnover of assets, but also certain liabilities. Nevertheless, it should be understood that in isolation from other indicators, turnover can not fully characterize the financial condition of the enterprise. In this regard, it is advisable to calculate the profitability indicators, as well as determine the degree of financial stability and dependence.