Total assets turnover ratio : Meaning, Formula and Example

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The total assets turnover ratio measures the sales generated per rupee of assets and is an indication of how efficient the company is in utilizing its assets to generate sales. This is different from the fixed assets turnover ratio.

Asset-intensive companies such as mining, manufacturing, and so on will generally have lower asset turnover ratios compared to companies that have fewer assets such as consulting and service companies.

Formula for Receivable turnover ratio / Accounts receivable turnover

\[Total\,assest\,turnover= \frac{{Sales}}{{Total assests}}\]

Example

Burger King has sales of Rs.5,45,000 and total assets in the amount of Rs.1,44,000. This gives a total asset turnover ratio of 3.78.

This means that for every rupee invested in assets the company generates Rs3.78 of sales. This number shall be compared to the industry average for companies in the same industry.