![]() ![]() If the ratio is high, it means the business is likely performing well because the high ratio shows that the business is doing a good job of using its assets to generate revenue or sales.Īlthough, it is important to consider that this ratio is typically higher in some sectors as compared to others.įor example, retail companies tend to have a high volume of sales and a reasonably small asset base, which gives them a high asset turnover ratio. Generally, a company will compute this ratio yearly. Divide the net sales by the average total assets. This will be listed on the business’s income statement. Find the company’s total sales or revenue.Add these two values together and then divide them by two to get the average value of the company’s assets. Then find the balance of the company’s assets as of the fiscal year’s end. Find the balance of the company’s assets at the beginning of the year on the company’s balance sheet. ![]() Determine the average value of the company’s assets. ![]() The following steps are used to calculate the asset turnover ratio. Total Asset Turnover = Net Sales / Average Total Assets The formula for the asset turnover ratio is: In contrast, businesses that have lower asset turnover ratios are not proficient at using their assets to produce revenue. If a business has a higher asset turnover ratio, it shows that the business is efficient at using its assets to generate revenue. This ratio can be used by investors or analysts to evaluate whether or not businesses are effectively making use of their assets to produce revenue. The asset turnover ratio compares the revenue or sales of a company to its asset base. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |