Enter the total sales revenue and the total assets into the calculator. The calculator will evaluate and display the asset turnover ratio.
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Asset Turnover Ratio Formula
The following equation can be used to calculate an asset turnover ratio.
AT = NS/ TA
- Where AT is the asset turnover ratio
- SR is the total net sales revenue
- TA is the total assets
Asset Turnover Ratio Definition
Asset turnover ratio is a financial termed used to describe the ratio of net sales to total assets. This ratio measures the ability of efficiency at which a company generates sales through its assets.
What is a good asset turnover ratio?
A good asset turnover ratio depends on the type of business or asset. In general, the higher the asset ratio the better it is for the companies bottom line. An asset turnover ratio, on a yearly net sales basis, of greater than .25 is typically considered average. This means the asset would pay for its self within 4 years. Anything greater than .25 is considered good. An asset turnover ratio greater than 1 means the asset returns more than its value on a yearly basis. This is extremely rare and would mean the investment is performing extremely well.
How to improve an asset turnover ratio?
The most common way to improve an asset turnover ratio is to increase the net sales generated through the asset or assets. For example, if you have a machine that produces goods, but is running at 50% efficiency due to it needing maintenance, getting the machine maintained and keeping it in good condition would instantly boost your asset turnover ratio.
Is asset turnover ratio a percentage?
An asset turnover ratio is simply a ratio of two values, so by default, it is not a percentage. With that said, any ratio can be displayed as a percentage if multiplied by 100. So, to convert the asset turnover ratio formula above into a percentage, multiply it by 100 = NS/TA * 100.
Asset Turnover Ratio Example
How to calculate asset turnover ratio?
- First, determine the total sales revenue.
Calculate the total sales revenue during a time period. For this example, we will say there was total net sales of $100.00.
- Next, determine the total assets.
Measure the the total assets of the business. For this example, the asset value is $500.00.
- Finally, calculate the asset turnover ratio.
Calculate the asset turnover ratio using the formula above. 100/500 = .20 = 20%.
An asset turnover ratio is a ratio of total sales revenue to total asset value of a business.