Then the asset turnover of Wal-Mart would be precisely (US $523.96 billion / US$228.1 billion) = 2.29xĪsset Turnover Ratio Formula = Sales / Average Assets So to calculate the average total assets, we need to take the average of the figure at the beginning of the year and of the figure at the end of the year, i.e. And its total assets were US $219.30 billion at the beginning of the year and US $236.50 at the end of the year. On 31 st January 2020, Wal-Mart had US $523.96 billion total revenues. It’s being seen that in the retail industry, this ratio is usually higher, i.e., more than 2. The higher the number the better would be the asset efficiency of the organization. And this revenue figure would equate to the sales figure in your Income Statement. In simple terms, the asset turnover ratio means how much revenue you earn based on the total assets. Alternatively, "Average Total Assets" can be ending total assets.Asset turnover ratio is the ratio between the net sales of a company and total average assets a company holds over some time this helps in deciding whether the company is creating enough revenues to make sure it is worth it to hold a heavy amount of assets under the company’s balance sheet.For such businesses it is advisable to use some other formula for Average Total Assets. This method can produce unreliable results for businesses that experience significant intra-year fluctuations. It is calculated by adding up the assets at the beginning of the period and the assets at the end of the period, then dividing that number by two. "Average Total Assets" is the average of the values of "Total assets" from the company's balance sheet in the beginning and the end of the fiscal period."Sales" is the value of "Net Sales" or "Sales" from the company's income statement.
Companies in the retail industry tend to have a very high turnover ratio due mainly to cutthroat and competitive pricing.Īsset Turnover = Net Sales Revenue Average Total Assets Ĭompanies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. As a financial and activity ratio, and as part of DuPont analysis, asset turnover is a part of company fundamental analysis. Total asset turnover ratios can be used to calculate Return On Equity (ROE) figures as part of DuPont analysis. Asset turnover can be further sub-divided into fixed asset turnover, which measures a company's use of its fixed assets to generate revenue, and working capital turnover, which measures a company's use of its current assets minus liabilities to generate revenue. Asset turnover is considered to be an Activity Ratio, which is a group of financial ratios that measure how efficiently a company uses assets. Asset turnover ( ATO), total asset turnover, or asset turns is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company.