ASSET ANALYSIS

 assets are engaged or tied to business process for a purpose of achieving business result
Purpose or OBJECTIVE of asset analysis
 to examine possibility for harmonization of business results and assets, either their total or
specific parts
TYPES OF ASSETS :
 material = the most important, l-term are land, buildings, equipment, machinery
 non material = l-term are goodwill, R&D, license
 monetary = s-term are raw materials, cash, receivables, inventories
1. Volume or SIZE of assets
Asset analysis assume comparison of size and dynamic of asset with other (related and
dependent) dimensions
DYNAMIC OF ASSETS = represents a change in the business situation of company and is
reflected in financial reports
= every quantitative change in assets (unless an accounting correction) represents a
qualitatively new business situation and with it a change in economic power of the company
 each entry of assets in business of the company = increase
 each exit of assets means = decrease of economic power of the company
Company achievements are compared to its assets :
 total revenue, revenue from sales, financial result, quantity
EACH COMPANY HAS ITS NORMAL = optimal ratio between achievements = revenue and
averagely engaged assets
EXISTS RELATIONSHIP between assets and number of employees
Economic power of labor expressed by indicator “equipment of labor with resources”
2. Analysis of structure of total assets is related to its decomposition :
A) organizational principle = according to places of work process
B) functional = long term assets and short term assets
FIXED ASSETS ANALYSIS
 analysis of value of l-term assets and analysis of the capacity
1. Analysis of volume and structure of fixed assets
 is related to insight into the size and dynamic of total l-t assets as a whole to other values to
which that assets are directly related and dependent
 it is related to the CAUSES AND CONSENQUENCES of the respective dynamic and
deviation from correspondent values
Fixed assets = complex value so inquiry into structure or its parts is done
IN ANALYSIS :
 decide if dynamic of l-t assets is real or fictitious
 real growth of assets = result of a purchase of new resources or a result of reconstruction
and modernization of existing resources
 real decline of assets = a result of retirement or sale of some resource when material
assets are in question OR when some nonmaterial or financial assets are realistically
decreasing
2. Criteria for structuring fixed assets
Fixed assets are divided to :
FORM, TYPE, ORGANIZATION, many other criteria
a) Form = represent a basic structure of fixed asset that can be : material l-term assets,
non-mat. L-t assets
Wider structure of fixed assets : nonmaterial, material, financial, receivables

b) Types = represent criteria for further decomposition of certain form of fixed assets
types according to the chart of accounts according to the IFRS are used = fixed assets,
intangible assets, financial assets, l-term receivables
ex. fixed assets decomposed = land, building, machinery, equipment
intangible assets = goodwill, patents and expenses for R&D
financial assets = SHARES with other companies, loans

c) Organization = is a criterion according to which fixed assets are decomposed to

individual organizational units like shop, hotel, office, store
 it is usually combined with criterion like types
d) Other criteria = decomposition is related to certain types of assets like machines and
equipment decomposed according to the year of purchase, origin, investment in
progress
Indicators :
 FA to FA as independent value
 Participation of respective part in total fixed assets
 relation of individual parts of FA
 relation of FA and ST assets
 relation od specific business results and FA or parts of FA
 relation of FA or parts of FA and the number of employees
 relation of respective part of FA
Relation of specific business results and FA or parts of FA
 expresses the efficiency of use of the respective assets
 fixed assets in relation to : TR, specific parts of revenue (from sales and other), financial
result, realized Q of product expressed as equivalent
Relation of FA or parts of FA and the number of employees
 express condition of business activity in the terms of equipment of business with LTA
 higher work equipment = higher economical power of the company = ability to achieve better
business result
 represents the relation between the value expressed as amount (asset) and value
expressed naturally (number of employees) – consider real and fictitious expression of the
related value
Indicator used = technical equipment of employees
= as a relation of specific types of assets like machines, tools and the number of employees

Assets can be expressed naturally or monetarily :

A) Relation of purchase (evaluated, reassessed) value of FA and number of
employees
 will express totality since all equipment, facilities and others can be expressed in
monetary values
B) Relation of naturally expressed FA of certain type like capacity, kW or useful store
area AND the number of employees
 SHOWS the amount of such naturally expressed assets per each employee
 IT DOES NOT express TOTALITY since all the facilities can not be expressed with
the same natural unit = size, weight
General advantage = it expresses the real power of work in natural sense and in the
fact that price changes do not influence it

Functionality and depreciation of respective part of FA

 are 2 complementary indicators
 they add up to 100 or 1 if expressed as coefficients
 functionality = a relation between depreciated part and purchase (evaluated, reassessed)
value of things that made LT materials assets shows ability
 depreciation = a relation between depreciated part and purchase value, shows the detritions
of the part of assets
 CHANGES IN ABIILITY result from detritions of assets and change from natural form of
things to monetary form
 THE STRUCTURE SHOWS : purchase value as a calc. base of depreciation, non-
depreciated (NET) value and depreciated value (value correction)
CAPACITY ANALYSIS
Capacity of certain types of LT material assets
 represents the quantitative and qualitative ability for execution of certain output
Capacity = represents a potential power that a company has at its disposal
 higher capacity usage = higher business rationality
Capacity of individual assets
 expressed in units of its purpose
 either it is quantity of performance that respective resource or group of resources can
accomplish OR it is quantity of raw materials that can be processed in unit of time Commented [LK1]:

Capacity is defined only if time, for which its ability is expressed, is defined.
 defined time is adapted to functionality of respective asset or group of assets
 capacity of restaurant = meals served during certain time
 machines in company = capacity is expressed on yearly basis
Capacity is expressed in physical units of measurement
 business space in m 2
 or purpose of business space like classroom = number of seats
 barrel capacity in m3
Different capacity terminology BUT :
A) Potential capacity
 Installed capacity Ci = designed, technical or max. capacity
 installed cap. Is the MAXIMUM capacity than CAN’T be exceeded
 Real capacity Cr = production or working capacity
 real cap. Is capacity that given concrete conditions can be normally used
 Cr SMALLER than Ci for normal deductions (D) like maintenance of the
equipment losses due to ageing of equipment, vacation
SO : Cr = Ci – D
 Optimal capacity
 is the capacity that provides the best ratio of revenues and expenses
 it is usually very close to optimal capacity

B) Used capacity
 Occupied or needed capacity Cn
 is capacity that is engaged or laden with the volume of business activity
(amount of goods & services) = it is a capacity required for execution of certain
volume of business
 CAPACITY < smaller than AVAILABLE CAPACITY = OCCUPIED
 CAPACITY is > larger than AVAILABLE CAPACITY = NEEDED
 Used capacity Cu = actually used capacity
 it can be determined only after the passage of time period for which capacity
utilization is analyzed
 the difference between Cn and Cu DUE TO the poor planning, wrong
calculation or better or worse business process related to capacity
Capacity analysis according to the :
1. Plan execution (p)
2. Capacity occupation (o)
3. Capacity utilization (u)
u=pxo
Capacity utilization = ratio of USED Cu and REAL Cr capacity expressed in percentage 
u (%) = Cu / Cr
Capacity in the industry calculated :
 in terms of hours of work
 installed machine power
= if allowance yearly production of 100.000 tons but produced 80.000  Cu = 80%

CURRENT ASSET ANALYSIS

 all assets that have TURNOVER less than a year
 liquidity = ability of uninterrupted unfolding of the business process without obstacles
 current assets that are turned = can be transformed from one to another forms, have different
forms, they change quicker or slower under the influence of dynamic surroundings and type of
business
TURNOVER of assets or resources = a process when current assets are transformed from
one form in another
MONEY –purchasing material, goods, services –production inventory –sales receivables
–receivables collection (realization) MONEY
CURRENT ASSETS analyzed similar to volume and structure analysis both in shorter or
longer time frames
a) Basic factors that influence the Q of STA
 Quantity = works though higher/lower output
 Prices = prices complement quantity
 STA are expressed as a sum of money so higher or lower Prices of the same
Q will result in higher/lower engagement of assets

 Time = defines the sum of STA

 the amount of engaged assets A is proportional to the value of effect E and
inversely proportional to the speed of turnover k = turnover coefficient
A=E/k
Value of E consists of q and p
E = q1 x p1 + q2 x p2 +…+ qn x pn
E = overall material stock
p = concrete price of that material
q = concrete quantity of that material
In products case
E = overall stock of finished products in terms of expenses
p = concrete expense of that type of product per unit
q = concrete amount of that type of product per unit

 Certain corrections = appear as a s result of certain influences that must be

taken into account like the influence of gain that the company usually realized at
the time of sale of products and for which company is diminishing the need
b) Criteria for decomposition of STA
 Form = decomposition on material (raw m., products) and non-material
(money, rights) assets
 Functionality = assets in preparation (money, stock of material, unfinished and
semi-finished products) and assets engaged in products (material used)
 Liquidity = liquid and non-liquid
 Receivables collection = collectable and non-collectable
 Organization = assets engaged in individual organizational units
 Phases consists of sub phases :
1. gathering, conservation and assignment of monetary resources
2. gathering material things and other conditions for business process and
material stock formation
3. production
4. formation of stock of finished products and sales
5. customer receivables
 Combined
 Q of TOTAL STA = sum of the assets in each specific part  it means
changes in any part = changes in total STA
c) Indicators of the STA
 STA as independent value = represents a piece of movement or tempo (relation
of asses of one or more time periods with base period) that is related to dynamic
of comparative values (plan, other companies)

 Turnover coefficient of total STA

= is a relation of effect and average engaged STA
= effect means revenue and expenses = expenses included in revenue  R –
gain
= effect is a movement (growing since the first to last day) = represented
cumulatively
= STA is a state = static = represented on average
Turnover indicator = a coefficient that shows how many times, on average,
assets are turned in observed period
 one turnover time measured in the number of retention days
 if observed period is a year 360 or 365 THEN days / turnover coefficient
 if o. period is half year 180 days, number of days / turnover coeff.
THE HIGHER THE SPEED OF TRUNOVER = LOWER THE Q OF STA

 Turnover coefficient of individual parts of STA

= calculated using the same principal as for the turnover coeff. of total STA taking
into consideration that for effect = individual outflow form related accounting
account is used and for state = average state on related account is used

 Turnover coefficient of funds = measured as a ratio of performance that

represents all payments in the observed period and average investment
 Turnover coefficient of securities = effect = their sold part and investments
= the average balance of securities for the analyzed period

 Turnover coefficient of receivables

 receivables = rights from sale of products, goods, services
 for financial analysts their amount is important because of :
a) their realization on solvency
b) their influence on gain

 Turnover coefficient of stock

 an indicator for measurement od average speed of stock in the phase of
reproduction
 stock : raw mat. and material, unfinished production, semi-finished and
finished and stock of goods
 for analysts stock is important because :
a) stock usually represents the largest part of STA
b) the influence the realization of gains

 Relation of realized Q of product and TOTAL (or parts) of STA

 reciprocal value of this shows HOW MANY $ of STA are RELATED TO 1
UNIT OF PHYSICALLY EXPRESSED PERFORMANCE