Because the operating nature of each industry is different, the fixed asset turnover will vary significantly from industry to industry. Therefore, the most important uses for this ratio are to compare across firms in a single industry or the same firm over time. Agilecor's fluctuating sales have left it with a volatile fixed asset ratio. In 1999 it was 0.29; in 2000 it was 1.26; and in 2001 it was 0.1. This high degree of volatility indicates that the company's ability to generate revenues is almost entirely disassociated from its fixed asset level. However, this could indicate that the firm is in an industry with low fixed assets but highly volatile earnings streams (for example, real estate sales).
Total liabilities to total assets is an indicator of the firm's degree of leverage. For 2000, this was 0.27; for 2001 this was...
These figures indicate that Agilecor is increasing its leverage. Given, the company's erratic performance, it is not surprising that the degree of leverage is increasing -- debt can help stabilize a company with highly volatile income streams.
Operating margin measures the firm's total ability to drive profits from its revenues. Whereas gross margin mainly reflects pricing power and variable cost control, operating margin adds to this fixed and overhead cost control. In 1999, the operating margin for Agilecor was 3.3%; in 2000 it was 20.9%; in 2001 it was 3.1%. This indicates that the firm has generally a low but stable level of operating margin. The year 2000 may be considered to be an outlier, since the firm recorded substantially higher margins all round during that year. It is unusual for firms in most…
