Definition
Asset turnover shows revenue generated per dollar of assets. High turnover indicates efficient asset utilization (common in retail), while low turnover may indicate capital-intensive operations (utilities, manufacturing). This ratio is a key component of the DuPont analysis framework.
functions Formula
Asset Turnover = Revenue / Average Total Assets
lightbulb Example
Annual revenue is $200M with average total assets of $100M. Asset turnover = 2.0x, meaning each dollar of assets generates $2 of revenue.
verified_user Key Points
- DuPont component measuring operational efficiency
- Retail and services have high turnover; utilities have low
- Declining turnover may signal asset bloat
- Fixed asset turnover focuses specifically on PP&E efficiency