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Calculating LTOAT (Avg Long term operating Assets)
Hi,
I am trying to calculate LTOAT (sales/Avg longterm operating assets). The problem I am having is calculating longterm operating assets from the balance sheet. I thought it would just be total assest - current assets but it's not? I'm really confused now about how to calculate the longterm assets in rder to calculate LTOAT. I've looked at examples but can't figure it out. Please help! |
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By pulling current assets out of total assets, you've arrived at long-term assets. But to get at long-term operating assets, you'll possibly need one more step, and that's to pull out any non-operating assets.
As a general idea, these would be long-term assets that aren't utilized in the normal business activities; e.g. a venture capital investment in a start-up, held purely as an auxiliary investment. The ratio you're working on gives a clue: Since you're comparing LTOA to Sales, you'll want that denominator to include exactly those assets which play some role in the generation of Sales. |
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