Asset Turnover and Strategic Management
Increasing net operating asset turnover requires some combination of increasing sales and/or decreasing net operating assets. For the latter, many companies consider ways to reduce their investment in working capital (current assets less current liabilities). This can be accomplished by reducing the level of accounts receivable and inventories, or by increasing the level of accounts payable.
1. Develop a list of suggested actions that you, as a manager, could undertake to achieve these three objectives.
2. Describe the marketing implications of reducing receivables and inventories, and the supplier implications of delaying payment. How can a company reduce working capital without negatively impacting its performance?