![]() A general rule of thumb is that a higher ratio means more efficient use of the company's assets. However, It is helpful to analyze the Working Capital Turnover Ratio and Fixed Asset Turnover Ratio separately to understand revenue-generating assets better. Investors and analysts can use this measure to compare similar companies to know how efficiently they use their assets. Other than that, ATR can calculate ROE( Return On Equity) in Dupont analysis. In addition, asset turnover can be affected by factors other than a company's efficiency.įor example, the ratio would be lower for a company with newer assets that are not yet depreciated and have a higher carrying value in the Balance sheet compared to that of a company with older assets that are highly depreciated.Īnalysts use activity ratios to measure the company's efficacy in using assets to generate revenue. This ratio includes the average of both fixed and current assets.Ī low ratio may indicate lower efficiency these are usually companies in a capital-intensive sector or industry or a new business that is just starting up and is not yet operating at full capacity. ![]() The Asset Turnover Ratio(ATR), or sometimes the Total Asset Turnover Ratio, generally measures the company’s ability to earn revenues with its assets in a given period.įor instance - A ratio of 1.3 indicates the company can earn $1.3 of revenue for every dollar of average assets.Ī higher number means greater efficiency in generating revenue.
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