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Interpretation of financial statements

4.4 Non-current asset turnover

This ratio measures how efficiently a business entity can generate sales revenue
from the use of its non-current assets. This is similar to ROCE but in this case we
measure the sales revenue generated for every $1 capital invested in non-current
assets in the entity. Generally speaking, the higher the ratio the more efficient the
entity has been in using its non-current assets to generate sales revenue.

The non-current asset turnover is calculated as follows:

Sales revenue
Non-current assets = times p.a.

Tutor notes guidance – discussion points

Discuss with students possible explanations for changes in the non-current
asset turnover.

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