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Asset Management

Asset management is a method where items that have monetary value to a business or individual are monitored and maintained. It is a systematic process of operating, maintaining, and upgrading assets cost-effectively and may apply to both tangible assets and intangible assets such as intellectual property and goodwill.  It includes managing assets so that the greatest return is achieved.  

Asset Management Ratios such as ROA, Return on Assets are well known business tools used to measure how efficient a company’s assets are.  ROA gives an idea as to how effective the business is when using assets to produce earnings. ROA is calculated by dividing earnings by total assets and is displayed as a percentage. It is an indicator of how profitable a company is when compared to its total assets.

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Some topics associated with asset management are:

  • Investments
  • Cash and Liquid Assets
  • Inventory
  • Fixed Assets
  • Intangible Assets
  • Asset Management Ratios
Investments are measured for profitability through a calculation called ROI, Return on Investments. A simple ROI calculation divides the potential return of an investment by the cost and the percentage is the ROI.  Companies usually have a minimum ROI that they are willing to accept in order to proceed with a specific investment. Also, the investment should coincide with the business plan of the company as well as long term investment goals.  ROI works best if the business is able to allocate direct income and direct expenses to a particular investment, as it provides more accurate information to base business decisions on.

Inventory is a crucial asset for a company to manage since it is imperative for companies to have the product they sell however maintaining excess inventory usually has a high carrying cost.  The inventory turnover ratio is one of the most important asset management or asset turnover ratios. The inventory turnover ratio is calculated by dividing net sales by the inventory and the result is a percentage.  That percentage reflects the number of times inventory is sold and restocked each year. If the number is too high, the company faces shortages of inventory and risks losing sales and if it is too low, it usually means the company is carrying excess or obsolete inventory.


Think about the benefits that will be realized when you work with an asset management professional. Contact a local asset management professional in your area.