Asset Turnover Ratio



Next video:
Loading the player...

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 per dollar of assets.

The formula for the ratio is as follows:

Sales or Revenues ÷ Total Assets

A higher number is preferable, since it suggests that the company is using its assets efficiently to make money. A lower number may convince a company to try other methods to help maximize the efficiency of its assets. Nevertheless, this ratio varies between industries and can only be compared effectively between businesses in the same sector. 

You May Also Like

Related Articles
  1. Fundamental Analysis

    How does the equity multiplier change in relation to asset turnover?

  2. Fundamental Analysis

    Why are efficiency ratios important to investors?

  3. Retirement

    Build A Wall Around Your Assets

  4. Retirement

    Combining Your Plan Assets? Not So Fast!

  5. Term

    Asset Turnover Ratio

  6. Investing Basics

    Patents Are Assets, So Learn How To Value Them

  7. Term

    Total Debt To Total Assets

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!