How to Calculate Total Asset Turnover Ratio

Calculate Total Asset Turnover Ratio - Definition, Formula, Example

Definition:

Asset turnover is a financial ratio which calculates the company's efficacy at using its assets in generating sales or revenue.

Formula:

Total Asset Turnover = Net sales revenue / Average total assets
Average total assets = (Beginning assets + Ending assets) / 2

Example :

In 2012 and 2013 a textile company had Rs.960000 and Rs.1690000 in assets respectively. The company generated revenue of Rs.1360000. Calculate the total asset turnover ratio for the company.

Given,

Beginning assets = Rs.960000 Ending assets = Rs.1690000 Sales revenue = Rs.1360000

Solution:
Step 1 :

Average total assets = (Beginning assets + Ending assets) / 2 = (960000 + 1690000) / 2 = 2650000 / 2 = 1325000 Rs

Step 2 :

Total Asset Turnover = Net sales revenue / Average total assets = 1360000 / 1325000 = 1.026


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