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What is the focus when evaluating Disney's asset utilization ratios? This category of ratios evaluates how...

What is the focus when evaluating Disney's asset utilization ratios? This category of ratios evaluates how effectively the company is using its investment in assets to generate sales.

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Answer #1

Here we are talking about Asset turnover ratio which is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company. The total asset turnover ratio calculates net sales as a percentage of assets to show how many sales are generated from each dollar of company assets.

For Example : Disney's Revenue for the three months ended in Mar. 2017 was $5,51,37 Millions and its Total average assets for the period was $9,57,89 Millions. Therefore, asset turnover for the period was 0.57.

Why we need to focus on Asset Turnover because it is liked with ROE and ROA for the company (DuPont formula):

ROE = (net profit margin) * (asset turnover) * (equity multiplier)

So higher the asset turnover ratio, better the ROE for the company.

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