This video shows how to calculate and interpret a company's Asset Turnover. The Asset Turnover is computed as follows:
Asset Turnover = Net Sales / Average Total Assets
Thus, a company with Net Sales of $100,000 and Average Total Assets of $25,000 would have an Asset Turnover of 4. This means the company generated four dollars in sales for every dollar of assets.
The Asset Turnover shows how good a company is at generating sales, given the assets it has. What is a good or bad Asset Turnover depends on the industry. A grocery store would probably have a higher Asset Turnover than a car dealership that sells luxury vehicles.—
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