|
|
| Asset
Turnover |
|
Indicates
the relationship between assets and revenue.
Things
to remember |
- Companies
with low profit margins tend to have high asset turnover,
those with high profit margins have low asset turnover
- it indicates pricing strategy.
- This
ratio is more useful for growth companies to check if
in fact they are growing revenue in proportion to sales.
|
|
|
[Click
on the image(s) above to see the financial statements] |
For
Cory's Tequila Co. |
$12,154 |
=
0.85 |
$14,725 |
|
Asset Turnover Analysis:
This ratio is useful to determine the amount of sales that are generated
from each dollar of assets. As noted above, companies with low profit
margins tend to have high asset turnover, those with high profit
margins have low asset turnover. Cory's Tequila Co.'s asset turnover
seems to be relatively low, meaning that it makes a high profit
margin on its products. For companies in the retail industry you
would expect a very high turnover ratio - mainly because of cutthroat
and competitive pricing.
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