What is the total asset turnover ratio and how is it calculated?
What is the total asset turnover ratio and how is it calculated?Answer: The total asset turnover ratio measures the ability of a company to use its assets to generate sales. The total asset turnover ratio considers all assets including fixed assets, like plant and equipment, as well as inventory and accounts receivable. The calculation for the total asset turnover ratio is: Net Sales/Total Assets = # Times Interpretation: The lower the total asset turnover ratio, as compared to historical data for the firm and industry data, the more sluggish the firm’s sales. This may indicate a problem with one or more of the asset categories composing total assets – inventory, receivables, or fixed assets. The small business owner shou
