Total asset turnover

Total asset turnover

Total asset turnover is used to determine how much sales revenue a company generates from its investment in assets.

Asset Turnover = frac{Revenue}{Total assets}

Suppose that two companies both have capital employed $100,000. However Company A has a sales revenue for the year of $150,000 and Company B has sales revenue for the year of $250,000. The asset turnover figure shows how much revenue is being earned for every $1 of Capital employed:

Company A = $150,000 / $100,000 = 1.5Company B = $250,000 / $100,000 = 2.5

This shows Company B is earning $2.50 of Sales revenue for every $1 invested compared to only $1.50 of sales revenue for Company A.

Note: That the asset turnover figure is an absolute figure and not a percentage.

See also Fixed asset turnover


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