Asset Turnover (ATO)

Asset Turnover (ATO)

Ratio: Sales divided by Assets

This ratio measures how asset-intensive a business is and the efficiency of the assets employed.

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; which may make it easier to expand.

Also called Asset Turns.

See also Income/Outcome Triangle for Ratio Analysis, Return On Assets (ROA), Net Asset Turnover.

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