Fixed Assets Turnover Ratio = Sales / Net Fixed Assets

Instead of Net Fixed Assets, one can even use the Average Net Fixed Assets. The Average Net Fixed Assets is calculated by adding the Opening and Closing Net Fixed Assets for the period and dividing the result by 2.

As per the Formula the Fixed Asset Turnover Ratio needs to be calculated on Net Fixed Assets. One can always debate whether to take Gross Fixed Assets or Net Fixed Assets for the purpose of calculating Fixed Asset Turnover Ratio. It is best to calculate it on both the ways since both will give different results and thus will have different interpretations.

The 3 examples given below explain why it is better to take Gross Fixed Assets instead of Net Fixed Assets.

Examples

Various examples of Fixed Asset Turnover Ratio (FATR) to reflect the result calculated on the basis of Gross Fixed Assets vis-à-vis Net Fixed Assets are

Scenario 1

Assuming that the Turnover over a period of 5 years has remained the same and Depreciation is charged on Straight Line Method Basis (Fixed Basis) @ 15%.

Let us Assume that Sales for each year is $ 100,000.

Fixed Assets Purchased amounts to $ 50,000

Net Fixed Assets (i.e. after Depreciation) for the 5 Years is

Year 1 - $ 42,500

Year 2 - $ 35,000

Year 3 - $ 27,500

Year 4 - $ 20,000

Year 5 - $ 12,500

Fixed Asset Turnover Ratio on Gross Fixed Assets will be

FATR = 100,000 / 50,000 = 2

Fixed Asset Turnover Ratio on Net Fixed Assets

Year 1

FATR = 100,000 / 42,500 = 2.4

Year 2

FATR = 100,000 / 35,000 = 2.9

Year 3

FATR = 100,000 / 27,500 = 3.6

Year 4

FATR = 100,000 / 20,000 = 5

Year 5

FATR = 100,000 / 12,500 = 8

Thus FATR remains the same at 2 on Gross Fixed Assets for a period of 5 years, whereas it keeps increasing year on year if calculated on Net Fixed Assets although the Sales has remained the same. It may give an indication that the company is performing well which may not necessarily be the case. In case the expenses remain the same there would also not be any difference in the profits of the company for the 5 year period.

Scenario 2

Assuming that the Turnover has increased over a period of 5 years and Depreciation is charged on Straight Line Method Basis (Fixed Basis) @ 15%. There is additional purchase of Fixed Assets during the 5 year period.

Thus the Sales for the period of 5 years is

Year 1 - $ 100,000

Year 2 - $ 110,000

Year 3 - $ 125,000

Year 4 - $ 150,000

Year 5 - $ 200,000

Fixed Assets Purchased each year includes

Year 1 - $ 50,000

Year 2 - $ 10,000

Year 3 - Nil

Year 4 - $ 20,000

Year 5 - $ 20,000

Gross Fixed Asset Value for the period of 5 years is

Year 1 - $ 50,000

Year 2 - $ 60,000

Year 3 - $ 60,000

Year 4 - $ 80,000

Year 5 - $ 100,000

Net Fixed Asset Value for the period of 5 years is

Year 1 - $50,000 - (15% of $50,000) = $ 42,500

Year 2 - ($ 42,500 - $ 7,500) + ($10,000 - $1,500) = $ 43,500

Year 3 - ($ 35,000 - $ 7,500) + ($ 8,500 - $ 1,500) = $ 34,500

Year 4 - ($ 27,500 - $ 7,500) + ($ 7,000 - $ 1,500) + ($ 20,000 - $ 3,000) = $ 42,500

Year 5 - ($ 20,000 - $ 7,500) + ($ 5,500 - $ 1,500) + ($ 17,000 - $ 3,000) + ($ 20,000 - $ 3,000) = $ 47,500

Thus Year Wise Fixed Asset Turnover Ratio on Gross Fixed Assets and Net Fixed Assets is

Year 1

On Gross Fixed Assets

FATR = (100,000 / 50,000) = 2

On Net Fixed Assets

FATR = (100,000 / 42,500) = 2.4

Year 2

On Gross Fixed Assets

FATR = (110,000 / 60,000) = 1.8

On Net Fixed Assets

FATR = (110,000 / 43,500) = 2.5

Year 3

On Gross Fixed Assets

FATR = (125,000 / 60,000) = 2.1

On Net Fixed Assets

FATR = (125,000 / 34,500) = 3.6

Year 4

On Gross Fixed Assets

FATR = (150,000 / 80,000) = 1.9

On Net Fixed Assets

FATR = (150,000 / 42,500) = 3.5

Year 5

On Gross Fixed Assets

FATR = (200,000 / 100,000) = 2

On Net Fixed Assets

FATR = (200,000 / 47,500) = 4.2

From the example above it can be seen that FATR on Gross Fixed Assets has remained in the range of 1.8 to 2.1. Though the Turnover has doubled between Year 1 to Year 5, the company has consistently invested in Fixed Assets during these 5 years, the Gross Value of which has also doubled in these 5 years. Thus the FATR in Year 1 and Year 5 has remained the same i.e. Turnover is 2 times Gross Fixed Assets. Thus it appears that the company is capital intensive and may be heavily dependent on adding Fixed Assets to increase its turnover.

When the above ratio is calculated on the basis of Net Fixed Assets there is an improvement in FATR from 2.4 in Year 1 to 4.2 in Year 5. The FATR of 4.2 at the end of year 5 may prima facie appear to be encouraging, however this may not necessarily be the case if all facts are considered.

Calculated on Net Fixed Assets the FATR has reduced only once from Year 3 (FATR is 3.6) to Year 4 (FATR is 3.5) due to addition in Fixed Assets amounting to $ 20,000 in Year 4, whereas the Turnover has increased by only $ 25,000 between Year 3 and Year 4.

On the basis of Gross Fixed Assets, there is a good increase of FATR ratio by 0.3 between Year 2 (FATR is 1.8) to Year 3 (FATR is 2.1) since the Turnover has increased inspite of no addition in Fixed Assets.

It would be more satisfactory for an organisation to see its FATR improve due to increase in turnover rather than decrease in value of its Fixed Assets because of depreciation.

Scenario 3

Assuming that the Turnover has decreased marginally over a period of 5 years and Depreciation is charged on Straight Line Method Basis (Fixed Basis) @ 15%.

The Sales for the period of 5 years is

Year 1 - $ 100,000

Year 2 - $ 98,000

Year 3 - $ 95,000

Year 4 - $ 90,000

Year 5 - $ 80,000

Fixed Assets Purchased amounts to $ 50,000

Net Fixed Assets (i.e. after Depreciation) for the 5 Years is

Year 1 - $ 42,500

Year 2 - $ 35,000

Year 3 - $ 27,500

Year 4 - $ 20,000

Year 5 - $ 12,500

Thus Year Wise Fixed Asset Turnover Ratio on Gross Fixed Assets and Net Fixed Assets is

Year 1

On Gross Fixed Assets

FATR = (100,000 / 50,000) = 2

On Net Fixed Assets

FATR = (100,000 / 42,500) = 2.4

Year 2

On Gross Fixed Assets

FATR = (98,000 / 50,000) = 1.96

On Net Fixed Assets

FATR = (98,000 / 35,000) = 2.8

Year 3

On Gross Fixed Assets

FATR = (95,000 / 50,000) = 1.9

On Net Fixed Assets

FATR = (95,000 / 27,500) = 3.5

Year 4

On Gross Fixed Assets

FATR = (90,000 / 50,000) = 1.8

On Net Fixed Assets

FATR = (90,000 / 20,000) = 4.5

Year 5

On Gross Fixed Assets

FATR = (80,000 / 50,000) = 1.6

On Net Fixed Assets

FATR = (80,000 / 12,500) = 6.4

From the example of Fixed Asset Turnover Ratio above again it can be seen that though the Sales is dropping every year, the FATR calculated on Net Fixed Assets has kept increasing from 2.4 (Year 1) to 6.4 (Year 5). During the same period the FATR on Gross Fixed Assets has dropped from 2 to 1.6.

There is every possibility that there is a drop in the Net Profits due to the fixed costs involved in running the business. However the FATR calculated on Net Fixed Assets will continue to show a positive picture.

Interpretation and Conclusion

A higher ratio means that the company is efficiently utilizing its Fixed Assets to generate revenue. A low ratio would mean that the company has huge funds blocked in its Fixed Assets, which may require reduction of investment in Fixed Assets or improving the sales in line with the investment. However it is also advisable to compare the ratio with companies in the same industry / business. An internal comparison on a year to year basis will not be sufficient.

What is an up-sell? It is the offer to sell your customer more products after they have already purchased something. The key is that this provides an opportunity to earn more revenue without additional marketing. Let us walk through a few examples.

Imagine that you are a florist and somebody orders a dozen roses. An up-sell offer might be something like the following “We have a special offer today. For only ten dollars more we can include a small teddy bear with your bouquet. Would you be interested?” The statement is quick, simple, and straightforward.

Realize that to be most effective with this strategy you must always be focused on your customer. Do not offer an up-sell of a product that is overly expensive or not a good match to the original product.

For example, if a woman were to buy a suit, a blouse might be a good up-sell, but not a lamp. Those items do not go together. Furthermore, a suit is not a good up-sell if the blouse were the original item purchased, because the price points are too extreme. An up-sell for a blouse might be another blouse, or a scarf.

By implementing a concise, logical and customer friendly up-sell strategy you can increase your profits while serving your customers. Do you want fries with that?

As competitive markets in world economy gradually become fiercer, finding all possible means of destroying their respective competitors, you'll find that your pockets are gradually tightening up, not breathing freely anymore. There isn't any more time for abundance on frivolity, luxurious items or simply buying what you want to for no reason at all. You may have to hold out on that beige Victorian bath or the hovering paper-shredder with in-built mp3 player.

Current inflation rates at 2.5%, job-cuts and food prices sky rocketing on a daily basis greatly contribute to our everyday juggling, to a more financially restrictive lifestyle in respect to previous years; as Mervyn King (governor of the Bank of England) has said in his recent speech “Serious thinking and a willingness to contemplate radical changes are necessary”. He also said other things of a similar nature. Therefore, either adapting to or changing with the current economy becomes crucial in order to survive.

Plants need water, oxygen and light; Machines need electricity in order to function; the modern human being needs a reclining hydraulics-chair, motorized, with embedded dvd-player, internet access and optional Dictaphone. Some even spot the signs of a recession early, ready to retire to their underground bunkers where SPAM and other canned goods are plenty stocked. It won't be long before we'll be eating our dog's food, or dog food or indeed our dog. It may well make for grim times ahead.

Thankfully enough, due to extensive research and the powers of investigative journalism, there are ways which allow us to escape the rigid and cold reality of having to work all our lives for little money, like the slippery weasels that we are. No longer working to repay a mortgage which we will certainly not benefit from (i.e. death) or writing a cheque signed “You see what I did there”. We will work together on things you could do to drastically improve your net income without having to work hard at it, and generating much more money than if you were.

The first thing is having rich parentage. This of course ensures that some of the wealth is distributed accordingly. This guarantees you money without having to move very much. Failing that, you could try applying for Government funding for a project which is based on "Ethnic Integration in modern society" or similarly entitled, this almost always guarantees funding from local Governments; should Government employees enquire about said project simply reply "The previous occupant has moved, I am just a tenant". Use some adequate apparel, such as a blonde wig or a colourful apron, should the authorities ever make a visit.

Another sure way to get large amounts of cash is sponsorship. Of course, with the advent of the internet this could also involve very little work, especially when instructing children to copy and paste text. For instance, post your proposal of a sponsored event in forums or newsgroups, widely frequented websites are also hugely profitable. An example of a good sponsored event is "Non-broadcastable and undocumented walking race": it will draw enough attention because it sounds interesting, yet people will not demand to see it.

These are some simple and fun ideas on how to make money fast without hard-work. Remember: Keep it fun-tastic! Some may work for you; some will simply be as futile as just sitting down reading this article. But one thing is certain: you will have had bundles of fun in the process, almost as much as I have had in making a profit from you reading this article.

Tricked you: now go and work so I can earn some money.

Tax can be defined as a compulsory levy by government on goods, services, income and wealth. Primarily to obtain revenue. In other word, it is levy or dues on the income of persons and companies. It provides definite source of revenue of person for government expenditure. It is the way by which government obtain extra money it spends from income of individual or companies.

Tax in Nigeria

In the Stone Age, tax was collected in Nigeria long before the coming of Europeans. It was collected by the Local Chiefs for the purpose of administration and defense. Every person was expected to give part of his or her proceeds from cultivation of land to the state. Those who were cultivations were required to give their sources for public work such as clearing the bush, digging the pit latrines, wells etc for the benefit of the community as a whole. Failure to render such services usually resulted in loss of properties, which might be reclaimed after payment of line.

With the coming of Europeans, taxes were collected from individual through local chiefs. In 1946, a legislative council was set for the whole country, which obliged the regional council with a large measure of financial responsibilities.

After independence state government were to find out other sources of generation revenue. The first tax was introduced in 1904 in the northern region by Lord Lugard known as community tax.

According to the tax laws the board can revised the assessment if it deems necessary, and can institute legal action against any tax defaulters in respective of his status in the community such legal rights have been derived by politician and poor administration of tax laws.

Types of Taxes

1. Direct Tax
2. Indirect Tax

Direct taxes in Nigeria consist of the following:

1. Personal Income Tax (PIT)

1.  
   • Company Income Tax (CIT)
   • Withholding Tax (WHT)
   • Capital Gain Tax (CGT)
   • Capital Transfer Tax (CTT)
   • Petroleum Profit Tax (PPT)

1. Indirect taxes in Nigeria consist of the following:

1. Custom Duties
2. Excise Duties
3. Value Added Tax (VAT)

Problems Encountered in Tax Collection

According to Lawal (1982) posits that the following are the problems of tax collection in Nigeria.

1. Inadequate Staff

   Lack of adequate staff or manpower to carryout the assignment efficiently and this has contributed to the low revenue generated for the country

2. Mismanagement of Tax Collected

   Where taxes collected were not been utilized for the purpose for which it was collected. This makes taxpayers not to give out their wealth for the nation.

3. Bribery and Corruption

   In this day, tax collected personal interest has over ride their official interest in the performance of their duties, consequently affect revenue generation for the nation

4. Poor accounting record

   Most businessmen, traders, professionals do not keep proper records of their income and expenditure

5. Inadequate Facilities

   The facilities like motor vehicle and motorcycle to carry out the assignment effectively is inadequate

6. Lack of voluntary compliance from the taxpayers

   This attitude of taxpayers cause tax avoidance, evasion and delinquency

Prospects of Tax Collection

Adam Smith (1968) identified the following prospects of tax collection.

1. The administration of tax collection will be strengthened to ensure more efficient tax collection, through training of staff, awareness, campaigns & computerization.
2. Government should continue to ensure that the tariff policy enables our local industries to be competitive.
3. Specifically, aggressive action should be taken to block revenue leakage on high duty goods and bulk items.
4. VAT has become a veritable source of revenue earnings for the government and therefore needs to be strengthened and expanded. To broaden the tax base and to bring the VAT administration closer to the taxpayers, new local VAT offices should be established all over the country.
5. Government should also ensure fair tax administration based on the principle of derivation of tax proceeds; it is recommended that the tax law should be enacted.

Disadvantages of Selling New Items

New items can be acquired in many different places. The buyer can find a thousand places on the Web to buy new stuff and feels obligated to search for the best price. In most cases, the goods are cheapest at the factories or farms where they were created.

If you're selling "new items," try to find a source within fifty miles of where you live. Think about how many local shop owners are buying new replacement stock for their stores each week. Hit the yellow pages. Check the listings for wholesale distributors. Go direct to the factory. Many factories are looking for new dealers. Don't be put off because they have a big name, they need distribution too. It's amazing how many of them are willing to drop ship - all you need to do is ask.

Distributorship

I recently tied up a distributorship for a new automotive product because...I asked. They did not have a distributor in my country and I was the only person to inquire. When I first called, I asked about wholesale pricing and when they supplied me with a discount I started thinking, "Why did they not inform me that I lived within the territory of an exclusive dealer?" One more phone call and I was the exclusive dealer. Now sales are exploding and I'm well protected simply because I asked!

Sources of Used Merchandise

In our town we have about a dozen thrift stores that are run by the Salvation Army, Goodwill, Second Heaven, and all church denominations etc. I hit them all once a week. Normally my two hour "shopping spree" ends with an average of fifty dollars spent. Fifty dollars in expenses usually nets me somewhere between three to five hundred dollars in profit. Local auctions and garage sales are also good sources for used merchandise. Use local search software like Poynt on instant messenger to make a route and follow it.

The Secret of Secrets

Get your name on the mailing list for all the local auctioneers. When they're called to hold estate sales, I'm usually the first person to find out about it. Yes I've gone to extremely well-attended events where there are only twenty or thirty other bidders present. That's because of bad advertising on their part.

Freight Claims

A friend of mine drives for two hours across state once a week for a Freight Claims auction on the outskirts of a big city. You have to buy large quantities of goods, but the prices he pays are unbelievable. Check with all the local freight companies and insurance companies and get the lowdown on how to buy damaged merchandise.

One word of caution, don't fall for those so-called "Super Disks" that you see advertised all over the Web that are supposed to be filled with "millions of wholesale leads". Few of them have any up-to-date information, and half the companies listed don't have Websites so you must call long distance to get the necessary information.

Dumpdiggers

Become a member in antiques collectors' social networking websites. Attend club meetings and participate in niche discussions on active forum sites. Read blogs like Dumpdiggers to get a sense for the world of modern day treasure hunting - its easy if you have even a little bit of wisdom.

Being an eBay Scavenger Is Easy

The best eBay scavengers think outside the box. I know a lady who only buys and sells fossils. Another chap plucks micro chips from the circuit boards he finds in trashed computers. Dumpster divers do best in industrial parts of town and often work out a route they travel once a week just before pick-ups. One guy popped out the lenses from a pair of broken binoculars and sold two bits of glass for forty dollars each. My daughter once brought me a handful of rare Billy Idol pins that she picked off an empty knapsack she found abandon on the transit system. I sold those pins for fifteen dollars each and bought her a brand new bicycle! Opportunities abound for scavengers of all ages - think and grow rich.

Concerned with winning competitive battles and obtaining global leadership, strategic intent implies a significant stretch of an organization's resources, capabilities, and core competencies. When established effectively, strategic intent can cause people to perform in ways they never imagined possible. Strategic intent exits when all employees and levels of a firm are committed to the pursuit of a specific (and significant) performance criterion. Strategic intent has been formed effectively when people believe profoundly in their product and industry, when they are focused totally on their firm's ability to out perform its competitors.

Strategic mission comes from strategic intent. Strategic mission is a statement of a firm's unique purpose and the scope of its operations in product and market terms. A strategic mission provides general descriptions of the products a firm intends to produce and the markets it will serve using its internally based core competencies. An effective strategic mission establishes a firm's individuality and is exciting, inspiring, and relevant to all stakeholders. Together, strategic intent and strategic mission yield the insights required to formulate and implement the firms' strategies. Basing their decisions partially on a firm's strategic intent and mission, top executives develop a strategic orientation and predisposition to adopt a certain strategy or strategies over others.

Can you actually make money without spending money? The answer is yes. When you know where to look and what to do.

Did you know that you can earn income on content you produce?

• Triond is one such opportunity. Advertisers place online advertising on pages where your work appears, thus generating revenue for you.
• Constant Content will offer the first couple of paragraphs of your submission, followed by a link for readers to purchase your article in its entirety.
• Associated Content offers $3.00-10.00 for submitted articles.
• Helium is also a place where you can earn income from your writing efforts. A portion of revenue is shared with you.

Blogging

• Blogitive - With Blogitive you can earn money with every posting.
• Blogvertise - Blogvertise pays for your blog posts, offering easy to complete blog assignments that run under 200 words.
• Payperpost - Advertisers will post all sorts of opportunities, from those with a simple "link back to this site" to others that incorporate product reviews with pictures. You choose which opportunity suits you and submit each blog for approval.

Paid to post

If you enjoy discussing topics about anything and everything under the sun, you can now turn your time into money on a daily basis. By starting discussions, posting responses, and referring friends you can earn a little doing something that may come naturally to you. Visit myLot.com to get started.

Paid to read

Paid to read programs are also an option; however, with some of these, you click on an advertisement, then have to wait as a clock ticks off the seconds and are then paid approximately one penny per click. Unless you have unlimited time and patience, these may not be the best option.

ReadersPaid is somewhat different and is definitely worth taking a look at. Compensation is generous and if you are willing to complete incentive offers, you are paid even more. What makes this program stand out is that you can make a tangible residual income-monthly earnings that continue to increase over time.

Submitting tips for pay

Daytipper is a great site that rewards tippers $3.00 per published tip. If you submit on a regular basis, earnings add up.

Blogs and HubPages

Why pay hosting/domain fees when you can set up a blog or a HubPage for free? You can share your content with the world and by including affiliate links/ads. and incorporating adsense, you can generate revenue via clicks and when someone purchases products from your site. You can place E-bay and Amazon capsules in your HubPages, which also generate income for you when someone purchases products.

Certainly, it can be seen that with a little time and effort, you can earn money using the Internet-and without spending a penny! Why wait. Get started today.

Business Managers spend valuable time poring over revenue and profit figures. The process focuses much attention on the analysis of financial statements, budgets, business plans, etc. However, a critical and often overlooked aspect is the quality of revenue. Armed with a sound understanding of what inputs drive quality, Business Managers can make more informed decisions on where to invest and where to focus management attention.

Quality of Revenue Explained

The concept of revenue quality speaks to how sustainable and predictable the revenue (and thus profit) is likely to be in the future. While traditional financial analysis can provide a detailed picture of what the revenues have been and where they have come from, it does a poor job of providing information that can drive meaningful decision-making for the future. In other words, an analysis in the absence of any attention given to quality provides no answers to the “why” questions and is of no real predictive value.

Over Reliance on Acquisition of New Clients

Most businesses expend a great deal of expense and investment in acquiring new clients, often with little or no return in the first year. A VP, Sales usually has quite a lot of money and resources at his/her disposal to pay commissions, travel costs, conference fees, etc. in order to land new clients. Given the often negative return on investment in the first year, if clients do not become repeat buyers in years 2, 3 and beyond, the business will very quickly run into severe financial difficulties. Unsuccessful companies tend to face this issue by investing even greater amounts in new client acquisition in order to make up for the loss of existing clients, and this negative cycle goes on until the company finally meets the financial breaking point.

The root of the problem is the mistaken assumption that adequate attention is being paid to nurture and extend the existing client relationships, and thus management focuses most of its attention on the sexier business of new sales. With management’s attention cast elsewhere, clients are lost as more and more investment is poured into the acquisition of new clients rather than into improving the existing client base.

What are the Components of Quality?

The quality of revenue can be broken down into 2 distinct components, which taken together provide an excellent picture of just how sustainable and predictable the revenue is; client loyalty and the presence of an account management structure.

Client Loyalty

Frederick Reichheld is the preeminent academic expert in this field of study, and I use his definition of loyalty – “The willingness of someone to make an investment or personal sacrifice in order to strengthen a relationship.” This is superior to the more common metric of satisfaction for the purpose of measuring the quality of revenue, because it predicts future behavior. And this is borne out in a review of studies which demonstrate that loyalty is highly correlated with profitable growth across many industries. An excellent summary of this area is captured in the December 2003 edition of the Harvard Business Review in an article entitled “The One Number You Need to Grow”.

Presence of Account Management Structure

As described above, most organizations seem to have lots of cash available for activities related to acquisition of new clients (low margin), but many have very little resources dedicated to the maintenance and growth of existing clients (high margin). But the quality of revenue is inextricably tied to the presence and effectiveness of an account management structure. This is about nurturing the client base and weaving an indispensable relationship between vendor and client so that it acts more like a partnership.

Putting it Altogether

Clients who are loyal and who are serviced by an effective account management structure buy more and remain as clients longer. Other benefits are solicited and unsolicited references provided to other clients, price acceptance and less drain on operational resources. All of this adds up to an enhanced quality of revenue and thus a permanent increase in future revenues.