It is difficult for ordinary investors to reach the management of a company. How to assess the level of management of a company? That's analyzing its operability. Companies with strong operational capabilities will have lower operational risk and higher profitability, resulting in higher competitiveness and return on investment. We list the three most commonly used metrics to measure a company's operational capability.

Turnover of total assets

This is a comprehensive indicator that evaluates the utilization efficiency of all assets of a company. The formula is calculated using revenue divided by the average total assets ((total assets in the initial period+total assets at the end of the period) /2). If the total asset turnover is greater than 1, it is usually better, but there are large differences between industries, and the indicator is consistently higher than that of peers, and management may also be relatively stronger.

Inventory Turnover Rate

This is an indicator that evaluates the efficiency of a company's inventory management. The formula is calculated by operating costs divided by average inventory. IF THE INVENTORY TURNOVER IS GREATER THAN 10, IT IS USUALLY BETTER, WHICH MAY MEAN THAT THE COMPANY HAS STRONG SALES AND PRODUCT SUPPLY IS NOT IN DEMAND. Conversely, if a company's inventory turnover rate is much lower than its peers, it may face greater sales pressure. Companies with lower inventory turnover also face the risk of inventory devaluation in the tech, trendy fashion, fresh, and other industries.

Turnover rate of accounts receivable

This is an indicator that evaluates the company's ability to repay. The formula is calculated using operating income/average receivables. If receivables have a turnover rate higher than 10, it is usually better, which means that the company has a strong ability to negotiate with customers and does not need to give too long bills. On the contrary, it indicates that the company's products may face sales pressure and weak ability to negotiate prices for customers. At the same time, accounts receivable may be at risk of devaluation if it is unprofitable for customers to collect debts.