Asset turnover ratio measures how efficiently a company uses its total assets to generate revenue. A higher ratio indicates better asset utilisation. Asset turnover = Revenue / Average total assets.
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Pro Tip
Asset turnover is most meaningful when compared within the same industry. Low-margin, high-volume businesses (grocery) typically have higher turnover than premium, low-volume businesses (luxury).
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Did You Know?
Retail businesses (Walmart ~2.3x) have much higher asset turnover than capital-intensive utilities (~0.3x) because retailers hold minimal fixed assets relative to revenue.
References
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