Quick Definition

The asset turnover ratio measures how efficiently a company uses its assets to generate sales revenue.

Formula

Examples

• 1A manufacturing company with total assets of $10 million and annual sales of $15 million has an asset turnover ratio of 1.5, indicating efficient use of assets.
• 2A retail chain with $50 million in assets and $100 million in sales has a ratio of 2.0, showing high efficiency in asset utilization.
• 3A tech startup with $5 million in assets but only $2 million in sales has a low asset turnover ratio of 0.4, suggesting poor asset utilization.

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