#Total asset turnover formula how to

Here are a few examples of how to calculate the asset turnover ratio:ĪBC Company had net sales of $1,000,000 and total assets of $500,000 at the beginning of the year and $750,000 at the end of the year. This measure is used to account for any changes in assets that occur over time, such as new asset purchases, asset disposals, or depreciation.Įxamples of Asset Turnover Ratio Calculation The average total assets are calculated by adding the beginning and ending total assets for a period and dividing the sum by 2. Net sales are an important measure of a company's revenue generation, as they reflect the actual amount of money that a company is earning from its operations.Īverage Total Assets: Average total assets are the total assets that a company holds over a specific period, divided by the number of periods. Net Sales: Net sales are the total sales revenue earned by a company during a specific period after deducting any discounts, returns, and allowances. Let's take a closer look at each component of the formula: Average total assets are calculated by adding the beginning and ending total assets for a period and dividing the sum by 2.

Net sales are the total sales revenue earned by a company after deducting any discounts, returns, and allowances. The formula is:Īsset Turnover Ratio = Net Sales / Average Total Assets The asset turnover ratio is calculated by dividing a company's net sales by its average total assets. This ratio is an important measure of a company's overall profitability and efficiency, as it shows how effectively a company is using its resources to generate revenue. It indicates how much revenue is generated for each dollar of assets that a company holds. The asset turnover ratio is a financial ratio that measures a company's efficiency in using its assets to generate revenue. Turnover Ratio What is the Asset Turnover Ratio?

Total asset turnover formula