1. Total Asset Turnover
This ratio measures a company's ability to generate sales given its investment in total assets. A ratio of 3 will mean that for every dollar invested in total assets, the company will generate 3 dollars in revenues. Capital-intensive businesses will have a lower total asset turnover than non-capital-intensive businesses.

Formula 7.25

Total asset turnover = net sales
                      average total assets

2. Fixed-Asset Turnover
This ratio is similar to total asset turnover; the difference is that only fixed assets are taken into account.

Formula 7.26

Fixed-asset turnover = net sales 
                  average net fixed assets

3. Equity Turnover
This ratio measures a company's ability to generate sales given its investment in total equity (common shareholders and preferred stockholders). A ratio of 3 will mean that for every dollar invested in total equity, the company will generate 3 dollars in revenues.

Formula 7.27

Equity turnover = net sales 
                average total equity
Business Risk Ratios

Related Articles
  1. Investing

    How to Calculate a Turnover Ratio

    A turnover ratio measures a mutual fund’s level of trading activity in a given time period, usually a year.
  2. Investing

    Asset Turnover Ratio

    Investopedia explains: The asset turnover ratio is a measure of a company's ability to use its assets to generate sales or revenue, and is a calculation of the amount of sales or revenue generated ...
  3. Investing

    Understanding Activity Ratios

    Activity ratios measure how effectively a business uses its assets.
  4. Managing Wealth

    Understanding Turnover

    Turnover has a number of different, but related, meanings depending on the context in which it is used. Generally, it means the number of times an item is replaced with a new or similar version ...
  5. Financial Advisor

    What Is Portfolio Turnover?

    Portfolio turnover measures a fund’s percentage of assets that are bought and sold by its manager over a year.
  6. Investing

    AR & Inventory Turnover Is Key For These Sectors

    Accounts receivable and inventory turnover are two important ratios in the current asset category. We will also discuss the key industries that benefit from a thorough understanding of these ...
  7. Investing

    Receivables Turnover Ratio

    The receivables turnover ratio is a measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. Learn more about it here.
  8. Investing

    Ratio Analysis

    Ratio analysis is the use of quantitative analysis of financial information in a company’s financial statements. The analysis is done by comparing line items in a company’s financial ...
  9. Trading

    Seven Emerging Currencies Challenging The Forex Hierarchy

    While the top-seven currencies follow a somewhat stable hierarchy, second-tier currencies can be all over the map.
Frequently Asked Questions
  1. When are Beneficiaries of a Will Notified?

    Learn when the beneficiaries of a will must be notified, and understand how this requirement varies depending on whether ...
  2. Why Does Larry Page Pay Himself a $1 Salary?

    Google co-founder Larry Page continues to take an annual salary of only $1 as chief executive officer.
  3. What is Common Stock and Preferred Stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ...
  4. Can CareCredit be Used for Family Members?

    Learn more about the available options that CareCredit offers to pay for out-of-pocket medical procedures with little to ...
Trading Center