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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