The asset turnover ratio is basically calculated to determine how well an organization is putting its assets to use to generate revenue. By diving the total income of the company as shown on the income statement by the total assets of the company as shown on the balance sheet, gives the asset turnover ratio. While doing so, the total assets should be averaged over the total period of time being considered. The important thing to understand over here is that this formula does not look over the profit generated by the company over its usage of assets but it only looks at the revenue that a company earns through the use of its assets. This is the most fundamental difference between the Return on Asset (ROA) and the Asset Turnover Ratio. There are about three kinds of this ratio, namely, the total asset turnover ratio, fixed asset turnover ratio and the working capital asset turnover ratio.
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What is Assets Turnover Ratio?
