asset turnover

A ratio that measures how efficiently a company uses its total assets to generate revenues. The formula to calculate asset turnover ratio is net revenues divided by average total assets. An asset turnover ratio of 0.72x indicates that the firm generates $0.72 of revenue for every $1 of assets that the company owns. A low asset turnover ratio may mean that the firm is inefficient in its use of its assets or that it is operating in a capital-intensive environment. Additionally, it may point to a strategic choice by management to use a more capital-intensive (as opposed to a more labor-intensive) approach.