Asset turnover
Financial Accounting glossary · Financial Statement Analysis & Ratios
Definition
Revenue / average total assets; measures how efficiently assets generate sales.
Asset turnover in plain English
Asset turnover measures how hard a company's stuff is working to generate sales. You take the sales (revenue) and divide by the average value of everything the company owns: Revenue / average total assets. A high number means the company squeezes lots of sales out of relatively little equipment, inventory, and buildings — it's efficient. Picture two food trucks that each cost $100,000 to set up: the one that rings up $300,000 in sales is working its truck three times as hard as the one that only rings up $100,000.
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