2.

Identification and assessment of loss making divisions and

implication of low value-added items for financial returns and
profitability

In order to identify which products divisions that produce low value-added

item and require huge working capital investment working capital
turnover ratio will be used. In order to identify which one of the sixth
divisions is requiring huge working capital investment, all sixth divisions
will be subjected to a Working Capital Turnover Ratio Analysis. Working
capital is defined as current assets minus current liabilities (Robinson,
Henry, Pirie & Broihahn 2015, p. 319).
Robinson, TR, Henry, E, Pirie, WL & Broihahn, MA 2015, International
financial statement analysis, 3rd Edition. John Wiley & Sons, Hoboken, NJ
Working capital turnover ratio indicates the number of times the working
capital is converted into sales. It is calculated according to the following
formula (p. 343, Murthy and Gurusamy, 2009) :
Working capital turnover ratio = Sales/Net Working Capital (i.e. current
assets minus current liabilities)