Answers the Question
How much are we making from our investment?
Calculator for Total Asset Turnover
What Is the Total Asset Turnover?
This formula examines how much profit is being generated by assets. All things being equal (which they never are), higher values are signs of more efficiently run companies.
Why Is it Important?
- This formula will provide insight into whether capital is being used efficiently or needs further examination.
Formula(s) to Calculate Total Asset Turnover
- TOTAL ASSET TURNOVER = NET SALES / TOTAL ASSETS
- Not considering the strategic position, research and development costs, and other potential value than might be received in the future but does not show up as sales in the present.
- Net sales does not mean net profits. Just because a total asset turnover is high, there is no reason to believe that a firm is profitable.
- Firms that rely upon renting assets (rather than purchasing them) may enjoy superior ratios, even though long-term costs will be higher.