What Is Asset Turnover Ratio? - CiteHR
Dinesh Divekar
Business Mentor, Consultant And Trainer
Sagar.modi11
Hr Professional
Meena Nakul Prasad
Business Dev

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Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company. Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. Companies in the retail industry tend to have a very high turnover ratio due mainly to cutthroat and competitive pricing.
Asset Turnover = Net Sales Revenue
Average Total Sales
• "Sales" is the value of "Net Sales" or "Sales" from the company's income statement
• "Average Total Assets" is the average of the values of "Total assets" from the company's balance sheet in the beginning and the end of the fiscal period.
It is calculated by adding up the assets at the beginning of the period and the assets at the end of the period, then dividing that number by two.
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Dear Sagar,
Thanks for uploading this information. Now I have a question to ask you. How different is this ratio from "Fixed Assets Ratio" (FAR)?
Secondly, if the company owns its building also then will you include the cost of the building at the beginning and end of the financial year "Average Total Assets"? When the economy is in upswing, real estate prices increase rapidly. In that case will this ratio give true picture of the assets?
Thanks,
Dinesh V Divekar
I own an architectural firm (newly established). I need to quote the turnover of my firm to an agency. How do I calculate this? Please help.
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