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'.
Net Asset Turnover ratio: Sales divided by Net Assets
where Net Assets = Total Assets less Current Liabilities
Example: The Round Number CompanySales = 200; Total Assets = 300; Current Liabilities = 36 Net Asset Turnover = 200/(300 - 36) = 200/264 = 62% |
This is an ‘operating ratio’; it measures the efficiency of the assets employed.
Like Asset Turnover, it shows the speed with which an amount of cash, equivalent to the money invested in the business by head office, 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.
Companies using Return on Net Assets (RONA) rather than Return on Assets (ROA) are likely to use Net Asset Turnover rather than Asset Turnover.
See the discussion of Net Assets
See also Income|Outcome Triangle for Ratio Analysis.
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.