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GuruFocus has detected 4 Warning Signs with Li & Fung Ltd \$LFUGF.
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Li & Fung Ltd (OTCPK:LFUGF)
Asset Turnover
1.16 (As of Dec. 2016)

Asset Turnover measures how quickly a company turns over its asset through sales. It is calculated as Revenue divided by Average Total Assets. Li & Fung Ltd's Revenue for the six months ended in Dec. 2016 was \$8,690 Mil. Li & Fung Ltd's Average Total Assets for the quarter that ended in Dec. 2016 was \$7,479 Mil. Therefore, Li & Fung Ltd's asset turnover for the quarter that ended in Dec. 2016 was 1.16.

Asset Turnover is linked to Return on Equity (ROE) through Du Pont Formula. Li & Fung Ltd's annualized Return on Equity (ROE) for the quarter that ended in Dec. 2016 was 12.85%. It is also linked to Return on Assets (ROA) through Du Pont Formula. Li & Fung Ltd's annualized Return on Assets (ROA) for the quarter that ended in Dec. 2016 was 4.03%.

Definition

Asset Turnover measures how quickly a company turns over its asset through sales.

Li & Fung Ltd's Asset Turnover for the fiscal year that ended in Dec. 2016 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (A: Dec. 2016 ) / ( (Total Assets (A: Dec. 2015 ) + Total Assets (A: Dec. 2016 )) / 2 ) = 16760.632 / ( (7933.099 + 7692.884) / 2 ) = 16760.632 / 7812.9915 = 2.15

Li & Fung Ltd's Asset Turnover for the quarter that ended in Dec. 2016 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (Q: Dec. 2016 ) / ( (Total Assets (Q: Jun. 2016 ) + Total Assets (Q: Dec. 2016 )) / 2 ) = 8689.899 / ( (7264.638 + 7692.884) / 2 ) = 8689.899 / 7478.761 = 1.16

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. Companies in the retail industry tend to have a very high turnover ratio.

Explanation

Asset Turnover is linked to Return on Equity (ROE) through Du Pont Formula.

Li & Fung Ltd's annulized Return on Equity (ROE) for the quarter that ended in Dec. 2016 is

 Return on Equity (ROE) (Q: Dec. 2016 ) = Net Income / Average Shareholder Equity = 301.662 / 2348.0005 = (Net Income / Revenue) * (Revenue / Average Total Assets) * (Average Total Assets / Average Equity) = (301.662 / 17379.798) * (17379.798 / 7478.761) * (7478.761 / 2348.0005) = Net Profit Margin * Asset Turnover * Leverage Ratio = 1.74 % * 2.3239 * 3.1852 = Return on Assets * Leverage Ratio = 4.03 % * 3.1852 = 12.85 %

Note: The Net Income data used here is two times the semi-annual (Dec. 2016) net income data. The Revenue data used here is two times the semi-annual (Dec. 2016) revenue data.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

It is also linked to Return on Assets (ROA) through Du Pont Formula:

Li & Fung Ltd's annulized Return on Assets (ROA) for the quarter that ended in Dec. 2016 is

 Return on Assets (ROA) (Q: Dec. 2016 ) = Net Income / Average Total Assets = 301.662 / 7478.761 = (Net Income / Revenue) * (Revenue / Average Total Assets) = (301.662 / 17379.798) * (17379.798 / 7478.761) = Net Profit Margin * Asset Turnover = 1.74 % * 2.3239 = 4.03 %

Note: The Net Income data used here is two times the semi-annual (Dec. 2016) net income data. The Revenue data used here is two times the semi-annual (Dec. 2016) revenue data.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Be Aware

In the article Joining The Dark Side: Pirates, Spies and Short Sellers, James Montier reported that In their US sample covering the period 1968-2003, Cooper et al find that firms with low asset growth outperformed firms with high asset growth by an astounding 20% p.a. equally weighted. Even when controlling for market, size and style, low asset growth firms outperformed high asset growth firms by 13% p.a. Therefore a company with fast asset growth may underperform.

Therefore, it is a good sign if a company's asset turnover is consistent or even increases. If a company's asset grows faster than sales, its asset turnover will decline, which can be a warning sign.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Li & Fung Ltd Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 turnover 3.43 3.21 2.63 2.14 1.96 1.76 1.55 1.84 2.30 2.15

Li & Fung Ltd Semi-Annual Data

 Jun12 Dec12 Jun13 Dec13 Jun14 Dec14 Jun15 Dec15 Jun16 Dec16 turnover 0.83 0.96 0.71 0.86 0.69 1.00 1.04 1.27 1.06 1.16
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