1. Based on your calculations of fixed-asset and total-asset turnover ratios, wh

Question

1. Based on your calculations of fixed-asset and total-asset turnover ratios, what would you recommend we do to improve our asset management?

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2. We would like to improve the use of our working capital. Based on your ratio calculations. What are your specific recommendations?

3. Based on the ratios you calculated above, would you invest in our company? Why or why not?

Choice Hotels

1.20

-0.096

1. Based on your calculations of fixed-asset and total-asset turnover ratios, what would you recommend we do to improve our asset management?

==

2. We would like to improve the use of our working capital. Based on your ratio calculations. What are your specific recommendations?

3. Based on the ratios you calculated above, would you invest in our company? Why or why not?

Choice Hotels

Ratios 2016 2015 Percent change from 2015 to 2016 Fixed-asset turnover ratio 1.66 1.45 0.14 Total-asset turnover ratio 0.16 0.18 -0.08 Accounts receivable to working capital            (263,667.69)       (208,016.00) 0.27 Long-term liabilities to working capital -263666 -208013 0.27 Sales to working capital -263668 -208013 0.27 Sales to assets 1.08

1.20

-0.096

Explanation / Answer

a) Fixed Assests Turnover is increasing meaning you are using your assets better than previous period. The assets have generated higher revenue per unit of fixed assets than previous period.

b) Total asset turnover is decreasing meaning you have accumulated large amount of non-fixed assets ; the proportion of contribution of revenue per unit of current assets has gone down

c) Accounts receivable to working capital is decreasing . Here assuming Working capital is negative i.e. Current Liabilities > Current Assets, then we can say that Account Recievables have considerably increased. This expalins the reduction of Total assets turnover as Accounts Recievables is a part of current assets which are increasing.

d) LT liabilities for the firm is increasing . The company is using more debt financing .

e) Sales are increasing but assets are increasing at higher rate

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