Asset Utilisation and Composition

Ratio 32. Net Working Assets % Turnover

Stocks plus trade-related debtors minus trade-related creditors, expressed as a percentage of turnover on all activities. Often referred to as working capital intensity.
Changes in net working assets, whether caused by changes in sales levels or other factors, have an impact on cash flow. However for typical associations this ratio tends to be negative and low, and hence a source of cash as associations grow.

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Ratio 33. Net Properties % Turnover

Cost of properties less accumulated depreciation less grants expressed as a percentage of total turnover. This is a measure of fixed capital intensity.
The net investment in housing assets required to generate 100 of sales. For traditional activities this will be very high. Activities not based on provision of housing units will be dramatically lower. It is advisable to monitor this ratio for changes caused by the changing mix of activities or escalating build costs. It has a key impact on profitability, cash flow and borrowing requirements. Efficient and profitable management of this ratio is important because these are the core assets that drive investment and borrowing.

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Ratio 34. Turnover / Total Operating Assets (times)

This compares total income from all activities to the total operating assets of the business, gross of grants but excluding all financial assets.
Assesses the revenues earned by the operating assets before costs are accounted for. This is used in conjunction with the operating margin and highlights the importance of understanding the interaction of margin and asset turnover on operating profitability.

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Ratio 35. Fixed Assets % Net Total Assets

The net value all fixed assets after depreciation and after capital grants, expressed as a percentage of total assets net of grants.
Quantifies the proportion of the balance sheet that consists of long term assets, dominated by properties which are the key operating assets of the business.

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Ratio 36. Other Assets % Net Total Assets

Other assets comprise any stock, trade debtors, prepayments and other current assets but excluding cash, expressed as a percentage of total assets net of grants.
This will be a very small proportion of the assets owned by the business for traditional activities of RSLs but may be higher for other activities.

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Ratio 37. Financial Assets % Net Total Assets

Cash, short-term and long-term investments expressed as a percentage of the total net assets employed in the business.
This will be variable across associations, depending on size and how liquidity is managed. Smaller associations may have as much as 10% held as cash but large associations much less.

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