This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
Asset Turnover measures the efficiency with which a company uses its Assets to generate Sales.
Example: The Round Number CompanySales = 200; Assets = 300 Asset Turnover (ATO) = 200/300 = 0.67 |
Asset Turnover shows the speed with which an amount of cash, equivalent to the money tied up in the business, comes back in through the door in fresh sales. It isn’t concerned with profit, only with cash flow. If sales are rapid, little cash is tied up to keep the business going; and if little cash is tied up in the business, it is easier to expand and make improvements.
See also Income|Outcome Triangle for Ratio Analysis.
Asset Turnover is also called Asset Turns.
See also Net Asset Turnover.
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Calculator for Asset Turnover
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The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.