Metrics (Asset Utilization) and New 2007 Accounting Standards (#30)

In this episode, we review upcoming new accounting standards, as well as some of the better metrics relating to asset utilization. Key points discussed concerning new accounting standards are:

Key points relating to the metrics for asset utilization are:

  • Sales per person; can be adjusted by using outsourcing or part-time employees

  • Need to look at asset utilization on an individual basis to see impact on bottleneck operations

  • Repairs to fixed assets ratio; fixed assets are stated at gross, and intangible assets are excluded

  • Accumulated depreciation to fixed assets ratio; increasing trend shows preponderance of old assets; might also still have old assets on the books that have already been dispositioned

  • Breakeven point; useful for understanding maximum possible profitability, as well as the margin of safety; can be used to view the impact of new fixed asset purchases on the breakeven point

Related Courses

Business Ratios Guidebook
GAAP Guidebook