What is asset turnover ratio formula?

The asset turnover ratio is a financial ratio used to measure a company’s ability to generate revenue from its assets. It is calculated by dividing a company’s net sales by its total assets.

The formula for asset turnover ratio is as follows:

Asset Turnover Ratio = Net Sales / Total Assets

Where:

• Net Sales = Total sales revenue minus any returns, allowances, or discounts
• Total Assets = The sum of all assets on the company’s balance sheet

This ratio helps investors and analysts to understand how efficiently a company is using its assets to generate revenue. A high asset turnover ratio indicates that a company is using its assets efficiently to generate sales, while a low ratio may suggest that the company is not effectively using its assets to generate revenue.