Both heavy and medium industry firms are seen to be having lower turnovers for inventory and receivables as well for total asset turnovers during both expansionary and contractionary policy periods compared to the light industry firms.
We also find that while contractionary policy significantly affects these firms' inventory turnover, receivables turnover and asset turnover ratios, its impact on high leverage and low leverage firms are in opposite directions.
The median values of inventory turnover, receivables turnover, and total asset turnover are 1.
Lower fixed asset ratios, increasing fixed asset turnovers.
Taking into account these values and in order to obtain high levels of ROE, these firms should aim to achieve those profiles described, in particular, by reducing the stock ratios to increase the current asset turnovers and to compensate the decline in asset turnover caused by the collapse of sales.
At a theoretical level, the DuPont Model establishes the relationships between financial profitability and a group of different variables and accounting ratios, such as asset turnover, sales margin or financial leverage.
Table 4 reports core profit margins and asset turnovers for each of the five years before and after the Q-scoring year, for both high- and low-Q groups.
Table 4 shows that mean asset turnovers increase after Year 0 for high-Q firms but decline for low-Q firms; thus, the Q-score predicts differences in changes in asset turnovers, as well as margins.
TABLE 4 Summary of Core Profit Margins (before Depreciation and Amortization) and Asset Turnovers in Years Relative to the Q-Scoring Year (Year 0) for Groups of Firms with High, Medium, and Low Q-Scores 1976-96 (a) Year Relative to Year Q-Score is Calculated (Year 0) -5 -4 -3 -2 Panel A: Core Profit Margin High Q 0.
To gain insight into asset turnover, individual asset turnovers for receivables, inventories, and fixed assets were examined.
profitability and asset turnover, relate to operating performance.
Parent firms in general have a lower asset turnover ratio (total sales over total assets) than do subsidiary companies.