Asset Turnover Ratio

The Asset Turnover Ratio measures how efficiently a company uses its assets to generate revenue. It is calculated by dividing total sales by total assets. A higher ratio indicates that the company is effectively utilizing its resources to produce sales, meaning it's getting more revenue for each dollar of assets it owns. For example, if a retail store has assets worth $100,000 and generates $500,000 in sales, its asset turnover ratio would be 5. This suggests it is very efficient at turning its assets into sales compared to a lower ratio.