Net Asset Turnover

Ratio: Sales divided by Net 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 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.

See also Income/Outcome Triangle for Ratio Analysis, Return on Net Assets (RONA), Asset Turnover (ATO).

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