Thursday, August 6

Asset Turnover Ratio

The asset turnover ratio is also a performance ratio that measures a firm’s capability to create earnings from its own shares by comparing internet earnings with typical total shares. To put it differently, this ratio demonstrates how effectively a business may utilize its shares to create sales.

The entire share turnover ratio computes net earnings as a proportion of shares to demonstrate the amount of sales are made from every dollar of business shares. As an example, a percentage of.5 means that every dollar of shares creates 50 cents of earnings.

Formula

The share turnover ratio is calculated by dividing net earnings by average total shares.

Asset Turnover Ratio