Asset Turnover
Asset turnover measures efficiency in using assets to generate sales: Revenue / Average Total Assets. Higher indicates better asset productivity.
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Definition
Asset turnover measures efficiency in using assets to generate sales: Revenue / Average Total Assets. Higher indicates better asset productivity.
Use case
Used in financial ratios workflows, analysis, and technical interviews.
Judgment check
Useful only when the assumptions and inputs behind the metric are understood.
Deep dive
How to think about Asset Turnover
Retailers and distributors typically have high asset turnover (2-3x), while capital-intensive manufacturers and utilities have lower turnover (0.3-0.5x). Asset turnover is a component of DuPont ROE decomposition. Improving asset turnover can significantly boost ROA and ROE without changing margins.
Example: Walmart generates $600B revenue with $250B average assets — turnover of 2.4x. An electric utility might generate $10B revenue with $30B assets — turnover of 0.33x. Different business models, not necessarily better or worse.