![]() Executives can use the ratio as a benchmark to compare a company's performance against its competitors. Stakeholders and business development executives can use this information to streamline business processes and make informed decisions about how to maximise profits and run the business more efficiently. The asset turnover ratio is useful in several business settings to help executives and accountants understand how efficiently a company is turning over its assets. Related: What is operating profit? (With examples and calculations) What is the purpose of the asset turnover ratio? Once you have these two figures, you can plug them into the formula to calculate the asset turnover ratio. You can calculate the average total assets by taking the total assets at the beginning of the year and dividing it by 12, or however many months are in the period that you're measuring. To calculate the asset turnover ratio, it's necessary to know a company's total revenue and its average total assets. The formula is:Īsset Turnover Ratio = Total revenue / Value of average total assets ![]() It's a simple mathematical formula that requires knowledge of both the value of a company's total assets and a company's total revenue. The asset turnover formula is a formula that accountants and executives can use to calculate a company's asset turnover ratio. ![]() ![]() In this article, we explore what the asset turnover formula is, how to use it to calculate an asset turnover ratio and provide examples of using the formula to calculate asset turnover ratio in different business settings. A high asset turnover ratio indicates that a company is efficiently turning over assets to generate revenue. This tells executives how efficiently a company is turning assets into profits. The asset turnover ratio is an important metric in business and finance because it helps stakeholders to understand the value of a company's revenue in relation to the value of its assets. ![]()
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