Asset Turnover

Asset Turnover represents the dollars in revenue a company generates per dollar of assets. Asset Turnover is typically used to gauge the efficiency of a company and its management at deploying capital for assets that generate revenue. Since revenue is generated over the course of a year, we average book value of Total Assets at the start and end of the year and use that in the denominator.

In general, a higher asset turnover ratio suggests management is utilizing the asset base efficiently.

Asset Turnover = Revenue / Average Total Assets