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.
Total Sales = Annual sales total
Beginning Assets = Assets at the start of the year
Ending Assets = Assets at end of year