Total Assets Turnover (or just ‘Assets Turnover’) is the amount
of sales generated per dollar of your assets. It is an indicator of the
efficiency with which your company is using its assets to generate revenue and is
calculated as your net sales divided by average assets for the corresponding
accounting period.
In the context of this formula, ‘net’ means sales net of returns,
allowances for damaged or missing goods and any discounts allowed by your sales
policies. Therefore, it is the same as the term Gross Sales used in this guide.
Generally speaking, the higher the ratio, the better it is,
since it implies the company is generating more revenues per dollar of
assets. But since this ratio varies
widely from one industry to the next, comparisons are only meaningful when they
are made for different companies in the same sector.
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