What is it?
The asset turnover ratio measures the value of a company’s sales or revenues relative to the value of its assets. The asset turnover ratio can be used as an indicator of the efficiency with which a company is using its assets to generate revenue. Total asset turnover is calculated as total sales divided by average total assets (beginning assets plus ending assets divided by 2).
Who is interested?
The financial community and investors.
What does it tell me?
The higher the asset turnover ratio, the more efficient a company. Conversely, if a company has a low asset turnover ratio, it indicates it is not efficiently using its assets to generate sales.