ASSET MANAGEMENT

Total Assets Turnover

Total Assets Turnover = Revenue ÷ Average Total Assets
      2017 2018 2019 2020 2021
₱
Net Sales   ₱ 6,276,000.00 ₱ 6,396,000.00 ₱ 6,516,000.00 ₱ 6,618,000.00 6,738,000.00
Ave. Total Assets ₱ 26,747,801.29 ₱27,186,353.71 ₱28,160,693.11 ₱ 29,382,423.31 ₱ 30,834,190.62
Ratio 23.46% 23.53% 23.14% 22.52% 21.85%

Total Assets Turnover (TATO) is a tool used to measure the efficiency of the firm in using its
assets to generate sales. The higher the asset turnover ratio, the better the company is performing,
since higher ratios imply that the company is generating more revenue per dollar of assets. 
It can be seen from the table that the management has difficulty managing and using its assets
efficiently since only once did the total asset turnover ratio increased (from 2017 to 2018) with
only 0.07% then declined steadily. It is therefore recommended that the management take a look
at their assets and properly used them to generate more revenues.

Fixed Asset Turnover Ratio

Fixed Asset Turnover Ratio = Revenue ÷ Average Fixed Assets
      2017 2018 2019 2020 2021
Net Sales   ₱ 6,276,000.00 ₱ 6,396,000.00 ₱ 6,516,000.00 ₱ 6,618,000.00 ₱ 6,738,000.00
Ave.NetFixedAssets ₱ 27,643,490.61 ₱27,347,283.42 ₱26,754,869.03 ₱ 26,162,454.65 ₱ 25,570,040.26
Ratio   22.70% 23.39% 24.35% 25.30% 26.35%

Fixed Asset Turnover measures the effective utilization of fixed assets. This ratio shows how
much revenue is generated or attributed for the use of fixed assets, and indicates the
reasonableness of the amount of these assets. An increasing ratio indicates that the assets are
used more productively. As shown in the table, the fixed assets are properly used as the ratio
increases through the years. Nonetheless, the firm still have some room to grow and be able to
use their assets productively.
PROFITABILITY RATIO
Return on Sales
Return on Sales = Net Income ÷ Net Sales
      2017 2018 2019 2020 2021
Net Income   ₱ 1,899,508.07 ₱ 2,249,319.02 ₱ 2,452,252.61 ₱ 2,712,850.00 ₱ 2,911,085.38
Net Sales ₱ 6,276,000.00 ₱ 6,396,000.00 ₱ 6,516,000.00 ₱ 6,618,000.00 ₱ 6,738,000.00
Ratio     30.27% 35.17% 37.63% 40.99% 43.20%

Return on Sales measure the profit percentage per peso sale. This ratio is widely used as a
measure of the overall profitability of operations. This measure is helpful to management,
providing insight into how much profit is being produced per peso of sales. Therefore, out of the
sales, only 30.27%, 35.17% and so on represents the profit earned by the partners. Increasing
return on sales is a good sign since it usually means that the company is starting to earn profit
than can cover their variable and fixed costs.
RETURN ON PARTNERS’ EQUITY
Return on Partners’ Equity = Net Income ÷ Average Equity
      2017 2018 2019 2020 2021
Net Income   ₱ 1,899,508.07 ₱ 2,249,319.02 ₱ 2,452,252.61 ₱ 2,712,850.00 ₱ 2,911,085.38
Ave.
Equity ₱ 13,899,508.07 ₱ 15,024,167.58 ₱17,374,953.39 ₱19,957,504.70 ₱22,769,472.39
Ratio     13.67% 14.97% 14.11% 13.59% 12.79%

This is one of the most important ratios to investors. Are you making enough profit to
compensate for the risk of being in business? How does this return compare to less risky
investments like bonds? Return on Equity measures the percentage of income derived or earned
in the use of equity financing. This ratio shows how well they are doing in their capital
utilization and for the generation of its income. The partners will incur losses for the first year
because of high start-up expenses and early entrance in the market. They would lose some of
their contribution, but during the operation of the business higher returns would be incurred.
The table shows that from the first year of operations, there was an increase in the ratio.
However, the succeeding three years’ ratio continuously decline. Even though the net income
earned by the partnership increases, the average equity increases at a bigger rate that results to a
smaller return on equity. However, a high, or low, ROE needs to be interpreted in the context of
a company's debt-equity relationship.