Definition of Asset Turnover

Asset turnover is the sales to asset ratio. It briefly shows how efficiently and effectively a company is using its assets to make sales.

So, if a company’s asset turnover ratio is higher, it indicates that the company is utilizing its resources in an efficient way to generate revenues. On the contrary, if the company’s asset turnover ratio is lower, it shows that the company is not utilizing its assets in order to generate higher revenues.



Asset turnover formula

Total Sales = Annual sales total

Beginning Assets = Assets at the start of the year

Ending Assets = Assets at end of year

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