Accounting / July 18, 2018 / Khloe Santiago
Asset management ratios are the key to analyzing how effectively and efficiency your small business is managing its assets to produce sales. Asset management ratios are also called turnover ratios or efficiency ratios. If you have too much invested in your company's assets, your operating capital will be too high. If you don't have enough invested in assets, you will lose sales and that will hurt your profitability, free cash flow, and stock price.
The total amount paid in rentals over the term is 4 x 3,100 = 12,400. This amount can be split into the original amount financed of 10,500, known as the principal amount, and the interest charge of 12,400 – 10,500 = 1,900. Under capital lease accounting, the rentals are paid to clear the capital lease principal and interest over the term of four years.
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