Total Asset Turnover

Year | Sales/Revenue | Total Asset | Total Asset Turnover |

2008 | 694,253,000 | 1,495,652,000 | 0.46x |

2009 | 605,684,000 | 1,141,137,000 | 0.53x |

Total asset turnover for the year 2009 is RM605,684,000 divided by RM1,141,137,000 which give a ratio of 0.53x. In the other hand, RM694,253,000 divided by RM1,495,652,000 with the ratio of 0.46x is for the year 2008. Total asset turnover is the amount of sales generated for every dollar’s worth of assets. Asset turnover measures a firm’s efficiency at using its assets in generating sales or revenue. Hence, the higher the number the better.

The ratio in 2009 is higher than 2008 with the value of 0.07. This may be due to several reasons. First, the productivity for the upstream oil & gas. Although the sales in 2009 is lower than 2008, the value of total assets in 2009 is also lower than in 2008. As stated, the total asset turnover is value of sales divided by total asset. A higher ratio in 2009 compared to 2008 means the productivity in 2009 is better than in 2008.

Next, the efficient monitoring of management is one of the other reasons. The efficiency monitoring of management gives the company a good relationship between the managers and the workers which can increase the productivity of the company and maximize the company’s profit. As the result, the ratio in 2009 is slightly higher in 2008.

Besides, the inflation of economy may affect the total asset turnover ratio. If there is inflation in economy, the company will result a higher value of current assets such as the account receivable, the inventories, prepaid expenses etc. Although the sales is high, but the value of current assets is also higher. As result, the calculation of the total asset turnover ratio will be not much different if value of current asset is high.