Asset Turnover Ratio

The asset turnover ratio analyzes the productivity of a company’s assets. It tells us how many dollars of sales a company generates for each dollar invested in assets. This ratio is computed by dividing net sales by average total assets for the period.

         Net sales÷average assets = Asset turnover ratio

Asset turnover measures how efficiently a company uses its assets to generate sales. Unless seasonal factors are significant, we can use the beginning and ending balance of total assets to determine average total assets.

Share it:  Cite

More from this Section

  • Cost center
    A cost center refers to a responsibility center that incurs costs (and expenses) but does ...
  • Accrual-basis accounting
    Accrual-basis accounting refers to an accounting basis in which companies record transactions ...
  • Black Friday
    Black Friday is the last Friday of the month of November. This day is usually celebrated ...
  • Unqualified Opinion
    An Unqualified Opinion is an opinion that accountants provide after evaluating financial ...
  • Free cash flow
    Free cash flow means cash provided by operating activities adjusted for capital expenditures ...