This total asset turnover calculator can help you determine the total asset turnover ratio. Also, the total asset turnover ratio indicates how much income a business can earn based on its asset base. This ratio shows how effective a corporation is at producing revenue. The next article will explain total asset turnover and how to calculate it using the formula for the total asset turnover ratio. We’ll also show you some real-life examples to help you grasp the topic better.

## What is the total asset turnover ratio?

The asset turnover ratio compares the value of a company’s sales or revenues to its assets. Furthermore, we may use the asset turnover ratio to determine how efficiently a firm uses its assets to produce income. The greater a company’s asset turnover ratio, the more efficiently it generates revenue from its assets. In contrast, a low asset turnover ratio implies that a corporation is not efficiently employing its assets to create revenue.

The organization may produce more income per unit asset with a high total asset turnover. A low total asset turnover, on the other hand, indicates that the firm is unable to create adequate outcomes with the assets it possesses. One of the most important phases in examining investment prospects is determining a company’s efficiency. As a result, understanding the computation utilizing the total asset turnover method is critical for investors.

## How to calculate total asset turnover?

Firstly, divide net sales or revenue by the average total assets to determine the asset turnover ratio. The technique consists of three phases, all of which are included in our asset turnover ratio calculator:

1. Calculate the revenue. A company’s revenue is in its income statement, generally on the first line.
2. Determine the average assets. The next stage is to compute the company’s average assets. We can calulate this using the following formula:

average assets = (beginning assets + ending assets) / 2

3. Determine the overall asset turnover. We can now compute the entire asset turnover. The formula for total asset turnover is as follows:

total asset turnover = revenue / average assets

## Total asset turnover formula

The denominator of the asset turnover ratio is the value of a company’s assets. Therefore, the average value of a company’s assets for the year must first be computed to assess its assets’ worth.

• Firstly, find the worth of the company’s assets on the balance sheet at the beginning of the year.
• Find the final balance or worth of the company’s assets at the conclusion of the fiscal year.
• Divide the sum of the starting and ending asset values by two to get the average value of the assets for the year.
• On the income statement, look for total sales (as revenue).
• Divide total sales or revenue by the year’s average asset value.

In addition to that, the procedures and calculations for determining the asset turnover ratio are provided below.

\large AT =\large\frac{TS}{\large\frac{BA + EA}{2}}

where:

Total Sales = Annual sales total

Beginning Assets = Assets at start of the year

Ending Assets = Assets at end of year

## ​ FAQ

What is a good total asset turnover ratio?

A retail firm may regard an asset turnover ratio of 2.5 or higher to be excellent. Still, a utility company is more likely to strive for an asset turnover ratio of 0.25 to 0.5.

What total asset turnover ratio of 3.5 indicates

A total asset turnover ratio of 3.5 means that the company acquired $3.50 in assets for every$1 in revenue during the year. As a result, the business made $3.50 in net income for every$1 in assets.

Total asset turnover indicates the firm’s

The asset turnover ratio compares the value of a company’s sales or revenues to its assets. The asset turnover ratio may be used to determine how efficiently a firm uses its assets to produce income.

What total asset turnover ratio of 2.6 indicates

With a total asset turnover ratio of 2.6, it is possible to conclude: Numerous Alternatives During the company acquired $2.6 in assets for every$1 in sales.

Can total asset turnover be negative?

When a company’s current liabilities exceed its current assets, the working capital turnover ratio becomes negative. Because net sales cannot be negative, a company’s turnover ratio might become negative when it has negative working capital.

How can a company improve its total asset turnover?

Increase your sales. Increased revenue can help you enhance your asset-turnover ratio. Increase your efficiency. Find strategies to make better use of your assets. Assets should be sold. Collections should be accelerated. Inventory and order systems should be computerized.

Is it better to have a high or low total asset turnover?

A greater ratio is generally preferred since it indicates that the firm is efficient in generating sales or revenues from its asset base. Also, a lower ratio implies that a corporation is not utilizing its assets efficiently and may be experiencing internal issues.