Financial Statement Analysis
 Ratio Analysis of Financial Statements (Formula, Types, Excel)
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 Liquidity
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 Days Inventory Outstanding
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 Average Collection Period
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 Cash Conversion Cycle
 Cash Conversion Cycle (CCC) Formula
 Fixed Asset Turnover Ratio Formula
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 Working Capital Turnover Ratio
 Profitability Ratios
 Profitability Ratios Formula
 Common Size Income Statement
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 ROIC Formula (Return on Invested Capital)
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 CFROI
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 Capital employed Employed
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 Return on Assets Formula
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 Revenue Per Employee Ratio
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 EBIT vs EBITDA
 EBITDAR
 Capital Gains Yield
 Tax Equivalent Yield
 LTM Revenue
 Operating Expense Ratio Formula
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 Markup Percentage Formula
 Efficiency Ratios
 Dividend Ratios
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 Debt to Equity Ratio
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 Debt to Asset Ratio Formula
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 Debt to Income Ratio Formula (DTI)
 Capital Gearing Ratio
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 Overcapitalization
 Interest Coverage Ratio
 Times Interest Earned Ratio
 Debt Service Coverage Ratio (DSCR)
 DSCR Formula (Debt service coverage ratio)
 Financial Leverage Ratio
 Financial Leverage Formula
 Degree of Financial Leverage Formula
 Net Debt Formula
 Leverage Ratios
 Leverage Ratios Formula
 Operating Leverage vs Financial Leverage
 Current Yield
 Debt Yield Ratio
 Solvency Ratio Formula
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Asset Turnover Ratio Formula (Table of Contents)
What is Asset Turnover Ratio Formula?
This formula is an efficiency ratio that judges how efficiently a company uses its assets to generate revenue.
Here’s this formula –
Asset Turnover Ratio Formula Example
Now, let’s take a practical example of the asset turnover ratio formula
YMC Company has gross sales of $75,000 at the end of 2017. The sales return for the year was $5000. The total assets at the beginning of the year were $120,000 and at the end of the year were $160,000. Calculate the asset turnover ratio of YMC Company.
First of all, we need to calculate net sales.
 We have gross sales and that is $75,000.
 We also have a sales return and that is $5000.
 Then, the net sales would be = ($75,000 – $5000) = $70,000.
Now, we will calculate the average total assets by using the simple average method.
 The total assets at the beginning of the year were $120,000. And the total assets at the end of the year were $160,000.
 Then, the average total assets for the year would be = ($120,000 + $160,000) / 2 = $280,000 / 2 = $140,000.
Now, we will put the data into the formula.
 Asset Turnover Ratio formula = Net Sales / Average Total Assets
 = $70,000 / $140,000 = 0.50.
If we compare the asset turnover of YMC Company with the asset turnover of a similar company under the same industry, we would be able to tell 0.50 is a good number or not.
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Explanation
This is the opposite of asset to sales ratio. In this ratio, we look at the net sales and average total assets.
In the income statement, the first item is “gross sales”.
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If we deduct “sales discount” or “sales return” from “gross sales”; we would get “net sales”.
On the other hand, to find the average total assets we need to look at the assets at the beginning of the year and the assets at the end of the year. And then we can take the average of the assets at the beginning and the assets at the ending.
If we want to go deep, we can use the weighted average method to calculate the average total assets.
Use of Asset Turnover Ratio Formula
Unlike the asset to sales ratio, in the case of calculation, more is better.
Why?
If this ratio is more, it indicates that the assets of the company are properly utilized and vice versa.
For example, if we find that the asset turnover ratio calculation is 0.6; that means net sales are 60% of the average total assets. Now, if this ratio is 1; then the net sales are 100% of the average total assets.
When a company buys new machinery, the sole objective is to increase the sale.
By installing new machinery, the company can produce more products, and sell out more products as well.
As a result, the revenue of the company increases along the way.
However, if installing new machinery don’t result in an increase in sales; that means either the machinery are defective or the company isn’t able to utilize the assets properly.
Asset Turnover Ratio Calculator
You can use the following Asset Turnover Ratio Calculator
Net Sales  
Average Total Assets  
Assets Turnover Ratio Formula  
Assets Turnover Ratio Formula = 


Asset Turnover Ratio Formula in Excel (with excel template)
Let us now do the same example above in Excel.
This is very simple. First, we need to calculate the net sales and then we will calculate the average total assets by using the simple average method.
You can easily calculate the ratio in the template provided.
Asset Turnover Ratio Formula Video
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