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. 

Related Articles
  1. Retirement

    Build A Wall Around Your Assets

    Learn how to protect your money from lawsuits, creditors and other judgment proceedings.
  2. Retirement

    Combining Your Plan Assets? Not So Fast!

    You might reduce the costs of maintaining more than one account, but you could also be forfeiting tax benefits.
  3. Investing Basics

    Patents Are Assets, So Learn How To Value Them

    Innovation is the key to staying on top. Find out how companies protect their ideas and how to figure out how much they're worth.
  4. Fundamental Analysis

    Reviewing Assets On The Balance Sheet

    A firm uses its assets to generate sales and bottom-line profits for shareholders. A healthy company will continually grow its assets, which stems from leftover profits that are reinvested back ...
  5. Investing Basics

    Diversify Your Strategies, Not Your Assets

    Asset classes are intentionally self-limiting, and their use is incapable of creating true portfolio diversification.
  6. Professionals

    Complete Guide To Corporate Finance

    Everything you need to know about corporate finance.
  7. Forex

    Return On Assets (ROA)

    Return on assets is one of the basic metrics used to evaluate a company's stock. Find out what it can tell you about a stock and learn how to calculate it here.
  8. Options & Futures

    Bank Failure: Will Your Assets Be Protected?

    The SIPC and FDIC insure against personal financial ruin when banks or brokerages go belly up.
  9. Investing

    How To Build a Currency Hedged Strategy?

    We are still unsure of how to implement a currency hedge strategy based on the dollar's movement. So let’s focus on what’s easier to measure: time horizon.
  10. Investing

    2 Common Ways to Misuse Target Date Funds

    The world of asset classes is just as complicated as taking vitamins. How much should you take of small caps? Intermediate bonds? Emerging market stocks?

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
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!