Asset Turnover Ratio Formula
There are many modifications of ‘asset turnover ratio’ formulas.
These are the most popular forms of this ratio formula:
(1) Asset turnover ratio = Sales revenue / Total average asset
(2) Asset turnover ratio = Sales /Assets
(3) Asset turnover ratio = Net sales revenue / Average assets
(4) Asset turnover ratio = Revenue / Total assets
However, this list of formulas also could be prolonged, but basically all of them mean the same. The first formula is the most exact. As ‘sales’ and ‘sales revenue’ have no differences, ‘revenue’ might include some non-operating income which not always should be include in this ratio (only if are recurring and use asset recourses of the company). Sales can be found in income statement of the company.
To use assets or average assets depends on the purpose of the analysis. For more accurate analysis average (beginning and end of the period) should be used in the formula. Assets are always disclosed in balance sheet of the company.
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