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.
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