postheadericon How to Calculate Asset Utilization

When it comes to the kinds of figures that business people use for directing a particular company or enterprise, asset utilization is one that’s frequently used. If you are in any kind of job position that requires assessing the relative success of a company, you may be wanting to use asset utilization to figure out just how efficient that company or business is. Asset utilization involves looking at how different assets or opportunities are used. In many firms, especially larger ones, an assessment of asset utilization can be very useful. Here are some of the common tips for doing asset utilization for a company or business.

1 Define business assets. People tend to think of business assets in terms of physical pieces of equipment, but there are a range of different other types of assets that are evaluated in asset utilization measurements. Consider real estate assets. One type of asset utilization value relates to real estate, where properties are often assessed in terms of how much income they bring a business through its real estate holdings. Include more abstract assets like warehousing space, specialized machinery and more. In many cases, asset utilization in an industrial setting necessitates taking into account all of the different small pieces that make up your total operating capacity. Make a detailed list of assets and consider what you can include in an asset valuation study. The more assets you include, the more complicated, but generally accurate, your final estimate will be. 2 Figure out total theoretical benefit for your assets. This step involves going over your collected list of assets and determining how much these assets could produce in tandem, in a completely theoretical situation. Here, you will be figuring out projected asset potential on paper, using any particular knowledge about the assets in question, whether it’s the peak operating power of machines, the maximum inventory capacity of a warehouse, or anything else related to 100 percent utility for business assets. 3 Measure your optimized asset values against actual, existing revenues or production numbers. The final part of doing an asset utilization calculation is to contrast the theoretical numbers with the ones that represent the past functioning of a company or business. Technically, the equation for asset utilization involves dividing the first number by the second. You will come up with a percentage of utilization that shows how efficient the business is in its current operations. 4 Use asset utilization calculations to figure out how to improve business processes. When you have your final percentage, you can start to work up detailed project initiative plans where you can estimate greater returns, greater profits or greater production based on existing inefficiencies. This is one of the most common uses of asset utilization, and a very powerful positive force for most businesses that employ this kind of technical analysis.

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