Definition
Asset turnover measures how efficiently a company uses assets to generate sales. It's a component of DuPont analysis (ROE = Margin × Turnover × Leverage). Low-margin businesses like retail need high turnover; high-margin businesses like software can have low turnover.
Formula
Asset Turnover = Revenue / Average Total Assets
Example
A retailer with $500M revenue and $250M assets has 2x asset turnover. A software company with same revenue but $1B assets has only 0.5x turnover but higher margins compensate.
FAQ
What is Asset Turnover?
Revenue generated per dollar of assets.
How do you calculate Asset Turnover?
A common formula for Asset Turnover is: Asset Turnover = Revenue / Average Total Assets
Why is Asset Turnover important?
Asset Turnover helps investors evaluate profitability and make more informed decisions.