Asset turnover

What is Asset turnover?

Asset turnover is Revenue divided by average Total assets for the last period.

Formula:

Revenue / Average total assets for two periods

What does Asset turnover mean?

Asset turnover can be used to measure the effectiveness with which a company uses its assets to generate income. The higher it is, the more efficient the company is, since higher ratios mean that the company generates more income per dollar of assets. Conversely, if the company has a low Asset turnover, this indicates that it is inefficiently using its assets. This ratio can vary by industry or sector.

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