Explore commonly used personal finance terms.
The asset turnover ratio is a financial metric that indicates how efficiently a company uses its assets to generate revenue. It is calculated by dividing total revenue by average total assets, with a higher ratio signifying greater efficiency. This ratio is particularly valuable in comparing the performance of companies within the same industry, as higher turnover generally implies better use of assets to drive sales. Companies can improve this ratio by optimizing inventory or enhancing production efficiency.
