Asset Turnover Ratio: Definition, Formula, and Analysis
The higher the number the better would be the asset efficiency of the organization. It’s being seen that in the retail industry, this ratio is usually higher, i.e., more than 2. The Asset Turnover Ratio is a crucial financial indicator that allows businesses and investors to assess a company's efficiency in using its assets to generate sales. It offers valuable insights into a company's operational effectiveness and can serve as a diagnostic tool to identify issues with inventory management, asset acquisition, and sales strategies. This ratio measures how efficiently a firm uses its assets to generate sales, so a higher ratio is always more favorable. Higher turnover ratios mean the company is using its assets more efficiently. Formula For Asset Turnover Ratio The value of a company’s total assets includes the value of its fixed assets, current assets, accounts receivable, and liquid
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