asset turnover ratio
Definition
The asset turnover ratio measures how efficiently a company uses its assets to generate revenue by dividing net sales by average total assets. A higher ratio indicates that the company generates more sales per dollar of assets, reflecting effective asset utilization and operational efficiency. A low ratio may signal under‑utilized assets, excess capacity, or overinvestment. Analysts compare asset turnover across peers within the same industry, since capital‑intensive businesses typically have lower turnover than service or software companies. Further breakdowns—such as fixed‑asset turnover—focus exclusively on property, plant, and equipment. Tracking asset turnover trends over time helps assess management’s ability to optimize investments and scale operations without diluting returns.
See also
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