Asset Turnover is a profitability ratio that measures how effective a company is at using assets to generate revenue. A higher Asset Turnover Ratio is preferred as it is indicative of better company performance.
It is important to note that the Asset Turnover Ratio can vary greatly between different sectors. Hence, the ratio should only be compared between different companies in the same sector.
Asset Turnover = Revenue ÷ Total Assets
As the asset turnover ratio uses sales/revenue in its calculation, the ratio does not account for the company’s expenses.